Key Drivers of September IPO Activity

During Q3, we’ve had one of the strongest backdrops for capital markets since COVID – with equity markets at or near all-time highs, tight credit spreads, low vol, and rates poised to move lower. In my client conversations, there is an acknowledgement that activity is broadening and confidence among issuers and investors is building. Those ready to move have been rewarded.   🔹Equity and Equity-linked markets have regained momentum. The IPO market has been at its busiest in 18 months, with weekly volumes three to four times the recent average. Sponsor-backed pipelines are beginning to re-emerge, including some of the year’s most anticipated deals. Aftermarket performance has been differentiated, which is a healthy sign of investor selectivity. Convertibles have also rebounded, with issuance approaching record levels. In Europe alone, four new deals have launched mid-August – evidence of how attractive the product has become after a quiet period. 🔹Debt Markets have been similarly active. In leveraged finance, M&A and LBO financing now account for ~30% of institutional loan volume year-to-date, versus ~25% last year. Carve-outs, LBOs and cross-border deals are being well received, with oversubscribed books and, in some cases, negative concessions. In investment grade, technicals remain robust: spreads on the US IG index are near their tightest levels in over two decades, while September issuance topped ~$150bn which is one of the busiest on record. Issuers with 2026 funding needs are bringing supply forward to take advantage of the favorable backdrop.   From my perspective, Q3 has been defined by renewed issuer and investor confidence. Markets are well bid, and investors are engaged but appropriately selective. We expect a continuation of these market dynamics as we head into Q4.

Why the IPO DRHP Rush Before September 30 Every Year? Each September, companies queue up to file their Draft Red Herring Prospectus (DRHP) but why the last-minute dash? Here’s what’s driving it: SEBI regulations allow issuers to use annual audited financials (March 31) for DRHP filings only until September 30. After this, companies must update their filings with new financials (interim results up to September 30), adding work and delaying their IPO process. Filing before the deadline ensures a smoother, faster IPO journey, with readily available audited numbers. This compliance rule sparks an annual surge. #drhp #IPO #CapitalMarkets

September is set to price 12 IPOs totaling $8B, the busiest month since 2021 by both deals and volume. Activity spans crypto (Gemini, Figure), fintech (Klarna), consumer (Black Rock Coffee), energy/industrials (Legence, Waterbridge), and the first biotech IPO since February (LB Pharmaceuticals). Investor demand is strong, with heavy roadshow engagement from blue-chip mutual funds, oversubscription at COVID-era levels, and >70% of deals pricing at the top end. Median IPO market cap is $4.2B (3.8x pre-COVID), with a median deal size of ~$730MM and ~90% of float trading Day 1. Investors remain focused on scale and liquidity, while deleveraging remains a theme (e.g., Legence shifting its greenshoe fully primary). Performance has been constructive but volatile: IPOs are up +16% on average (10 of 12 above issue), outperforming the S&P by ~12ppts, though Day 1 trading has seen wide swings. Momentum looks set to continue with 20+ IPOs possible before year-end, potentially bringing 2025 issuance above $40B. #IPO #CapitalMarkets #EquityCapitalMarkets #MarketUpdate #InvestmentBanking #DealFlow #Fundraising #FinancialMarkets #InvestorDemand #Liquidity #Valuations #EquityMarkets #venturecapital

India’s IPO market is seeing an unprecedented surge. As per the latest RBI bulletin, India's IPO market has had a remarkable 2024 so far, leading the global tally with 27% of IPOs by volume in H1:2024. 🤑 Investor enthusiasm is evident from the fact that a housing finance company IPO in September garnered bids exceeding ₹3 lakh crore! Among SME IPOs, HOAC Foods India, tops the list, was subscribed nearly 1,963 times when the issue was launched in May 2024. It was followed by Magenta Lifecare, which was launched in June 2024, and was subscribed nearly 1,003 times. Interestingly, it's not just IPOs. Other avenues of resource mobilization, such as Qualified Institutional Placements (QIPs) and Preferential Allotments, are experiencing a sharp rise in 2024-25, thanks to favourable market conditions. Funds raised via QIP for the first 8 months of the year have been estimated at around 60,000 cr. However, this momentum also brings certain concerns. While the robust primary market activity aids capital raising, there’s growing scrutiny of promoters offloading shares at high valuations, particularly in the SME space. Regulatory reforms, such as the cap on IPO funding by NBFCs and the shift from proportional to lottery-based allotments in mainboard IPOs, have curbed excessive oversubscription rates. Yet, the SME segment continues to see high oversubscription, partly due to the persistence of proportional allotment methods. September 2024 has become the busiest month for IPOs in the last 14 years, with over 28 companies tapping the market. SME IPOs have seen heightened interest from domestic mutual funds, and oversubscription rates remain massive. One of the key drivers? Listing gains. A recent SEBI study reveals that 54% of IPO shares allotted are sold within a week of listing. This unprecedented surge in fundraising points to only one thing, the promotors believe they are getting great valuations for their assets. I would believe that this is the time to be cautious in equity market, best to invest gradually from here on. What do you think?