Bankers are working on more than US$6 billion ($7.84 billion) of initial public offerings (IPO) in Japan and India this week, getting a boost from two markets that have become an increasingly important revenue source amid a prolonged deal slump in China.
Listings from Hyundai Motor Co.’s India unit, subway operator Tokyo Metro Co. and Japanese X-ray technology company Rigaku Holdings Corp. will push IPO volumes in Asia Pacific excluding China past US$28 billion, comfortably beating the US$23.7 billion sold in 2023, data compiled by Bloomberg show.
The deals underscore the increasing reliance on Japan and India among investment bankers who for years looked to China for bumper deal fees. Chinese listings have raised just over US$20 billion this year, down from about US$136 billion in 2021, after regulators increased their scrutiny of new deals and investors backed away amid concerns about the economy.
The rise in Asia Pacific ex-China volumes has been fueled by more than US$9 billion of supply from India, one of the biggest beneficiaries of investors’ doubts about China over the past year.
“The stars are aligned in many respects,” says Rahul Saraf, India head of investment banking at Citigroup Inc., of the nation’s IPO market. He adds that many Indian businesses have matured enough to list, and a stable political environment has provided a good backdrop for deals.
Hyundai Motor Co.’s India unit is taking orders this week for a US$3.3 billion share sale, on track to be the country’s largest ever IPO. The deal has already seen solid demand, with BlackRock Inc., Singaporean sovereign wealth fund GIC Pte and Capital Group among those to bid for the company’s shares, Bloomberg News reported last week.
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India’s busy market for share sales is leading to some concerns about a bubble. Regulators have cracked down on irregularities such as financial statement fraud and price manipulation, eager to bolster the credibility of India’s capital markets ahead of major IPOs in the pipeline.
The country’s IPO mania will eventually fizzle, but that doesn’t mean the market will abruptly turn south, says Nitin Mathur, an associate investment director at Fidelity International.
“There could be a period of volatility because valuations in some areas of the market are expensive,” he says. But that wouldn’t be a bad thing for the long-term health of the market, he adds.
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Japanese Listings
There have been recent signs of life for bankers working on listings for Chinese companies, with appliance maker Midea Group Co.’s recent US$4.6 billion share sale in Hong Kong providing an optimistic backdrop for other deals.
In Japan this week, subway operator Tokyo Metro Co. is expected to price up to US$2.3 billion listing, the country’s largest in six years, while X-ray technology company Rigaku Holdings Corp. is slated to raise more than US$730 million from its own Tokyo listing.
Long-only investors have covered the entire international tranche of Tokyo Metro’s IPO, Bloomberg News reported last week. Rigaku’s share sale was also said to have seen international order books being covered within a day of the deal’s launch.
“Large-scale IPOs like that of Tokyo Metro attract significant attention from overseas investors,” says Chizuru Morishita, a researcher at NLI Research Institute. “If successful, it could make it easier for other companies to enter the market.”
A rally in Japanese shares and a push for companies to boost shareholder returns and cut cross-shareholdings with other firms have provided a rosy backdrop for share sales in the country.
Hyundai Motor India is expected to list its shares on Oct 22. Tokyo Metro is set to debut on Oct 23, and Rigaku on Oct 25.
