India is a favourable place for companies to go public and launch IPOs, according to Shailendra Singh, who is the managing director at Peak XV Partners (previously Sequoia Capital India & Southeast Asia). In an interview, Singh said that the strong rules and regulations in India make it an attractive option for IPOs. “The regulatory framework in Indian public markets, including the work of the Securities and Exchange Board of India and the Reserve Bank of India, is really good,” Singh noted.
Having been with the venture capital firm for 18 years and leading it since 2011, Singh emphasised that India has fostered a conducive environment for companies to go public. He mentioned that it is secure and lively in India for a new company to become public.
Last year, India saw 220 IPOs, marking a 48 percent increase from 2022, and making it the second-largest IPO market globally, according to an EY report. Although Mainland China had the most IPOs, the number fell by 29 percent to 302. In contrast, the Indian IPO market is expected to stay strong in 2024, supported by positive investor sentiment, a robust economy, and the prospect of lower inflation and interest rate cuts, according to EY.
Singh highlighted that the growth of Indian capital markets has greatly improved the environment for IPOs. He said that Indian capital markets have made significant progress over time. They have become more liquid, and there’s a lot of interest in tech companies because we’re starting to see many with substantial revenues and profits. KPMG also supports this view, recently noting that India stands out as a strong performer in the global economy thanks to its solid economic fundamentals.
Explaining why some Indian companies choose to list in India rather than the U.S., Singh said that the founders are realising that the U.S. markets may not always understand Indian companies. This preference for local listings is clear, with 20 companies in Peak XV’s portfolio, including Zomato and Mamaearth, that have been public through IPOs in India. Peak XV Partners, a major investor in technology companies across Asia, oversees assets worth $9 billion.
The way venture capital works in India is changing, especially after Sequoia restructured its operations in June. Now, it is divided into three parts: Sequoia Capital in the U.S. and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China. Peak XV Partners, for example, has put money into more than 400 companies across different fields like technology, software, finance, and consumer goods. Some of their notable investments include Pine Labs, a fintech company in India, Kopi Kenangan, a coffee chain in Indonesia, Carousell, an online marketplace in Singapore, and big names in the education technology sector like Byju’s and Unacademy.
Singh pinpointed several promising areas for investment in India. He finds cross-border software, fintech, and consumer sectors particularly intriguing. Cross-border software companies, which are created in India but intended for global markets, offer a significant investment opportunity for Peak XV. The fintech sector is also a major focus due to India’s innovative digital infrastructure, including Aadhaar, UPI, and the India stack. In the consumer sector, Singh emphasised brands, educational technology (edtech), and healthcare as key areas of interest. He mentioned that there are exciting opportunities in emerging fields like deep tech and semiconductors, even though these areas are still developing. He stated, “We are just beginning to invest in these sectors,” highlighting Peak XV’s forward-thinking approach to investments.
Modi Government’s Role in Creating a Favourable IPO Environment
The favourable environment for IPOs and investments in India is mostly because of the economic reforms and policies implemented under Prime Minister Narendra Modi’s leadership. Since he started leading in 2014, his government has worked on making it easier to do business, making rules stronger, and encouraging digital technology. These changes have changed how people invest in India.
The Modi government has worked hard to make it easier for businesses to operate in India. They’ve simplified the process of getting permits, made things more transparent, and cut down on unnecessary paperwork. The introduction of the Goods and Services Tax (GST) in 2017 made the tax system simpler, especially for businesses operating in different states. The government has also improved regulations to make them clearer and more friendly for investors.
New digital projects like Digital India and the popular use of Unified Payments Interface (UPI) have changed how money works in India. The India Stack is a collection of digital tools that the government, businesses, and others can use, like a toolbox. It has helped more people join the financial system and has boosted the growth of financial technology (fintech) companies. The Aadhaar system, which uses biometrics like fingerprints, has made it easier for millions of people to open bank accounts and use other financial services. This has also encouraged more innovation in fintech.
Moreover, the Modi government has been actively encouraging new businesses through programmes like Startup India and Make in India. These initiatives offer help with money, advice, and following the rules, which boosts a lively startup atmosphere. They also created the Fund of Funds for Startups (FFS) to make it easier for new entrepreneurs to get money, helping innovative companies grow and even go public.
All these changes and actions have made the market better. People feel more confident about investing because the economy keeps growing steadily, rules are clear, and there are plans to keep improving things. Also, the expectation of prices going down and interest rates being cut makes the future look bright for 2024 and beyond.
As India continues to evolve as a global economic powerhouse, the teamwork between government actions and private businesses’ energy will probably keep the IPO market going strong. Peak XV Partners, with its smart investments and focus on fast-growing industries, is in a good position to take advantage of this positive situation, helping and gaining from India’s ongoing economic progress.
