India’s IPO volume likely to double from 2024 level: Goldman Sachs’ Ian Drayton

MUMBAI: Valuations may remain elevated in India, but with the structural and fundamental story picking up and the geographic opportunity set in Asia diversifying into a wider set of investment destinations outside of China, local capital markets could see the IPO party widen till 2025. A bumper year of primary issues, said a senior Goldman Sachs executive. Dealmaking through mergers and acquisitions (M&A) will also accelerate globally, he said.

In 2024, deal volumes in Indian equity capital markets—initial public offerings, QIPs, block sales—more than doubled from the previous year to $71 billion, making the country second only to the US.

“India accounted for 11% of global volume, up from 5% a year ago,” said Ian Drayton, head of investment banking Asia (excluding Japan) at Goldman Sachs. “I expect to see significant follow-on and block activity in 2025. Market conditions permitting, it should be another record year for Indian IPOs. All going well, 2025 IPO volumes should again, more than double 2024. Drayton oversees key markets such as India, Greater China including Hong Kong and Taiwan, as well as South Korea and Southeast Asia.

Beijing’s recent fiscal stimulus to boost domestic growth and demand could open a window of opportunity not seen in years. Goldman Sachs took three Chinese companies — Horizon Robotics, SF Express and Pony AI — public late last year. But it is still far from the peak seen five years ago.

“My expectation is that this window extends to 2025, but it’s too early to conclude that China is definitively back,” Drayton said, pointing to a larger trend that has been underway over the past few years.

From 2021, while total issuance volume has declined, the percentage of Chinese listings has also declined. Smart money, raised and initially earmarked for China’s public and private markets, is being diverted to other markets in the region, notably India and Japan, followed by Taiwan, ANZ and Korea. “In the private markets, if one looks only at private equity (PE), the pace at which general partners (GPs) are leaning more towards India, Japan and ANZ is striking,” he said.

Drayton, AGE, is an ardent Manchester United supporter of English-Trinidadian stock and has spent half his life in Asia. In addition to being Head of Investment Banking, he leads coverage of private equity or financial sponsors for Goldman Sachs in the region.

But it is too easy to compare the capital flows of India and China and they are not necessarily mutually exclusive, he said. Since the beginning of 2021, foreign institutional investor inflows into India have stood at just $8 billion against domestic inflows of $133 billion. Equity capital market (ECM) volume during that period was about $160 billion. Drayton highlights that foreign institutional investors typically participate in ECM deals to gain their exposure to India and that in 2024 alone, over $12.9 billion of global money went into ECM transactions, even with periodic net outflows to the secondary market.

After last summer’s general elections, which saw Narendra Modi return to power for a third term, investors pulled in a cumulative $13.5 billion in October and November alone. Barring these two exceptional months in the June-December period, foreign inflows have in fact been net positive. Slow India Inc. Regardless of corporate earnings or slower demand, Drayton said “it’s not just a rotation from India to China.”

In the medium and long term, India has ample opportunities to assess and participate in global funds. “I expect them to continue to buy into the India growth story,” he said. “But I also think that at the same time China presents an interesting buying opportunity right now. The path will probably be non-linear.”

Deal dossiers
Blockbuster gains by US stocks in 2024, expectations that President-elect Donald Trump will cut regulations and taxes, and further monetary policy easing by the Federal Reserve after three consecutive cuts in late 2024 are all raising hopes for dynamic dealmaking in 2025. Drayton, this is likely to be driven by three key considerations – sponsors seeking liquidity, transformational corporate-led M&A and industry-disruptive tech.

Dealmakers are anticipating a rush of US IPOs after a drought in the past three years following a sustained drive by the Federal Reserve to raise sharp rate hikes starting in 2022. DeLogic data shows that US listings will raise just $32 billion in 2024, excluding special purpose acquisition companies, just a fifth of 2021’s $150 billion.

According to the Goldman Sachs 2025 M&A Outlook white paper, 47% of surveyed clients worldwide believe that strategic growth and the addition of new capabilities will be the primary drivers of M&A decisions this year. “We are seeing that investors are no longer taking a ‘wait and see’ approach but are actively deploying capital in all regions,” he said. “Along those lines, with global M&A momentum continuing in 2025, we expect cross-regional dealmaking to again continue to grow in a non-linear fashion, both in depth and breadth.”

Flows between the US and Europe have seen strong momentum, Drayton said. But it is the resurgence of cross-regional M&A in Asia, which contributed around 30% of global transaction volume in 2024 and announced $150 billion in September alone, that has been particularly encouraging.

“Although China’s largest market has seen overall M&A volume decline in recent years, other countries have begun to fill the vacuum,” he said. “In 2024, Japan experienced particularly strong growth with M&A volumes increasing by more than 30% year-on-year. In addition to the continued appetite for cross-border transactions, corporate governance reforms and the government’s new guidelines on corporate takeovers are expected to boost momentum at the domestic level.”

India’s M&A story is equally strong, representing nearly 20% of volumes in Asia (ex-Japan) in 2024.

To support such increased activity, Goldman Sachs, which established its Mumbai office nearly 20 years ago in 2006, added heft and head count to the team overseen by CEO Sonjoy Chatterjee. In July, it elevated Sudarshan Ramakrishnan and Devarajan Nambakam to co-heads of investment banking.

“The fact that we held our board meeting here in June 2023 shows how important India is to our firm,” Drayton said.

Sunil Khaitan joins as Managing Director and Head of Financing India.

“Companies with Western-style corporate governance that tap into India’s strong macroeconomic trends are seeing premium valuations and attracting significant foreign capital,” adds Drayton. “Many multinational corporations gain valuation differences through capital markets by spinning off or publicly listing their Indian subsidiaries or consolidating through mergers.”

In November, Reliance Industries and Walt Disney completed an $8.5 billion merger of the latter’s Indian media assets with Goldman as adviser.

Globally, increased ECM activity ultimately leads to more M&A. “We expect more global strategies to increasingly look at entering India or expanding their presence through joint ventures, acquisitions, financial investments or strategic investments,” Drayton said.

Sectors that support large demographics and mass consumption will continue to be the focus. These include financial services along with healthcare, consumer and consumer derivatives, export oriented business (IT services), infrastructure, real estate and renewables.

“India was also one of the few global markets to see significant exits by private equity investors in 2024, further catalysing deal activity,” noted Drayton.

PAG acquired Manjushree Technopack from Advent International, another PE fund, for $1 billion; Goldman was the sellside advisor. “The broader momentum in India suggests a rising tide,” Drayton said.