“Last year, blocks totalled approximately $17 billion; this year, we’re already at approximately $13 billion. The key is confidence: issuers now believe large transactions can be absorbed, and investors are comfortable with bigger blocks,” Natarajan said, referring to block deals, or a transaction for a large quantity of shares of a listed company.
The real challenge is extreme volatility: it pauses markets, he explained. When the volatility index crosses the 20 level, there is a pause, for instance, during the national election results week or the Indo-Pakistan strikes. When the volatility index is below 20, it’s mainly about pricing, not demand, Natarajan added.
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Just to gauge sector and investor traction—which sectors are seeing high interest?
Industrials, especially manufacturing and renewables, certain pockets of consumer and healthcare, such as single speciality and technology players with AI (artificial intellgence) tailwinds, are seeing investor focus. In the case of financials, banks—specifically large-cap banks—and select financials, especially those with a track record of consistent execution, are attracting investor appetite.
Are there any sectors that you are currently avoiding?
It’s not about sectors but about specific business models—whether it’s the company’s size, stage of evolution, transient volatility or ongoing restructuring. In these cases, we don’t avoid them, but we advise waiting until things are sorted before tapping the market.
The first quarter of this calendar year (January-March) was slow, with very few large deals. Activity picked up sharply from April, with IPOs totalling about $7 billion so far this financial year.
Earlier, foreign institutional investors (FIIs) had a higher anchor share, but mutual funds (MFs) now lead, with the split approximately 46:54 in favour of MFs. Also, FII selling in secondary markets has little to no correlation with their anchor participation. For instance, in October-November last year, FIIs sold $13 billion even as 14 IPOs, including Hyundai, went through. Anchor participation stayed steady at about 47%. Similarly, despite a $16-17 billion pullout in January-March, FII anchor participation was still 52% plus. By April-June, when FIIs turned buyers, it reverted to about 46%.
DIIs have just surpassed FIIs in ownership of Indian equities.
FIIs own approximately 17% of Indian equities (about $850 billion), so a $13 billion/$16 billion selloff doesn’t mean much. Long-only sovereign wealth funds and some FIIs often anchor IPOs, while others may be selling on the secondary market—sometimes even within the same institution via different strategies or pools of capital.
That said, it’s now a well-known fact that domestic MFs currently lead the book for IPOs. The AUM (assets under management) of MFs has grown from about ₹20 trillion in 2017 to about ₹30 trillion by 2020, then to about ₹50 trillion by 2023, and has surged to ₹75 trillion-plus today.
India is a growing economy, and there will always be a need for capital (both public and private), and international investors play a meaningful role in fulfilling this need.
Then why do we need FIIs?
In the evolution of any capital market, all pools of capital and all types of investors are important and have a role to play in keeping the market vibrant. FIIs play a very important role in channelling international savings into Indian capital markets. India is a growing economy, and there will always be a need for capital (both public and private), and international investors play a meaningful role in fulfilling this need.
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Over the past decade, what changes have you observed in the ECM space?
We have seen ECM activity take off due to domestic liquidity in the form of SIPs (systematic investment plans) into MFs and significant FPI (foreign portfolio investment) interest in participating in the fastest-growing large economy. The regulatory environment has also facilitated a robust ECM market, clocking $60 billion-plus last financial year across IPOs, QIPs (qualified institutional placement), blocks, etc.
Blocks really took off with the private equity (PE) wave. PE entered India meaningfully around 2006-07, and over time became a key supplier of shares post-IPO. Back then, blocks weren’t even a major ECM product. Today, blocks have grown sharply.
Earlier, investors favoured IPOs only if the proceeds went to the company, but now they’re comfortable even with 100% secondary IPOs if the growth story is strong.
Also, with MF assets under management surging, average IPO sizes have risen from about $100 million in 2023 to about $200 million. I am confident that we will see multiple billion-dollar deals absorbed simultaneously due to improving market depth.
What’s the sentiment for QIPs as compared to block deals?
QIPs are supply-constrained since they happen only when companies need money. Blocks, on the other hand, are independent of company needs. With corporate India already deleveraged, QIPs have been lower than blocks in follow-ons. QIPs are dominated by financials, where money is the raw material—but if their balance sheets are healthy, they don’t need fresh capital.
What does the rest of FY26 look like? Do you see more of QIPs, blocks or IPOs?
Compared to previous years, this year’s IPOs are still tracking strong. The last financial year saw around $20 billion; so far this financial year, $7 billion of IPOs have happened. IPOs amounting to $5.3 billion were consummated in the same period. While we may not significantly beat last year, we should come close—especially if a few large $1 billion-plus IPOs land, which I expect will happen given the trend toward bigger issues and strong SIP flows.
Blocks, however, look set to surpass IPOs. Last year, blocks totalled about $17 billion; this year, we’re already at about $13 billion. The key is confidence: issuers now believe large transactions can be absorbed, and investors are comfortable with bigger blocks.
The real challenge is extreme volatility: it pauses markets.
But a lot of it also depends on how the market moves, right?
The real challenge is extreme volatility: it pauses markets. When the volatility index crosses the 20 mark, there is a pause, for instance, during the national election results week or the Indo-Pakistan strikes. When the volatility index is below 20, it’s mainly about pricing, not demand.
But when markets are choppy or in a consolidation phase like now, what’s the sentiment?
Whenever the market picks up, issues move quickly. There are phases of slowdown, pause or frenzy, and issuers act accordingly. With over 100 IPOs filed and 50-plus already approved, supply isn’t the problem. The real challenge is that convincing investors now takes longer—they are selective, want more time, deeper engagement and clearer visibility on business models and valuations before committing. But markets aren’t shutting down; it’s mostly about pricing, and issuers hold off if it doesn’t work for them.
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How are valuations looking now? Earlier there seemed to be a mismatch.
Valuation mismatches show up more in IPOs. Issuers fix a valuation months in advance, but by the time the IPO hits the market—after documentation, the Securities and Exchange Board of India (Sebi) approval, and roadshows—markets may have moved. Add to that the gap between what promoters think their company is worth versus investor benchmarks, and you already have a disconnect. Put together, these factors make IPO pricing inherently uncertain.
Are confidential filings also a way to protect valuations—so that external factors don’t or market chatter doesn’t influence them once the filing is public? Since once it’s out, valuations can get debated and renegotiated.
In confidential filings, companies file numbers with Sebi privately, get approval and only then go public. This shortens the gap between public filing and launch, though the overall process is longer since steps that were parallel now happen in sequence. It helps if you want to market with updated numbers later, or if you’re going through an acquisition or restructuring. Sebi approval here is valid for 18 months versus 12 in a normal filing, giving issuers more flexibility on timing. The main benefit is lower exposure to valuation risk between public filing and launch, though overall timelines stretch, and market volatility, and IPO discounts still drive pricing.
What types of companies are coming to the market—specifically, which ones are opting for IPOs, which for QIPs and which for blocks?
For IPOs, companies usually tap markets after reaching a certain scale. From an investor’s perspective, the preference is for a differentiated story—either truly unique or best-in-class within their peer group.
For QIPs, it’s typically established players with a proven track record and clear capital requirements—whether for capital expenditures linked to themes like Make in India or China+1 or for time-tested financials. Investors have already tracked their execution and metrics quarter after quarter, so QIPs are more functional and balance-sheet driven.
Again, investors look for companies with solid track records and financial delivery for blocks, similar to QIPs, but they also weigh the overhang that comes with such transactions.
In block deals, if supply is staggered, investors may wait, but conviction around strong financial delivery and risk of price movement nudges investors to act now rather than pay a higher price later. We see this in IPOs as well, where scarcity due to differentiated business models creates a tipping point for investors to get into transaction mode.
Blocks are quicker and growing, but IPOs are the base. IPOs are where the real marketing happens…
How is it from your side of the table?
Blocks are quicker and growing, but IPOs are the base. IPOs are where the real marketing happens—positioning, investor perception, the whole story-building. Blocks, in that sense, ride on the back of IPOs.
In terms of ECM revenues, blocks have contributed around 30% in recent years, though this percentage varies depending on chunky transactions.
Will this mix change?
Over the medium term, say two to five years, I see it inching towards 40% contribution.
Why?
Unlisted GDP (gross domestic product) converting into listed market cap generates IPOs. Think of blocks as a rolling stone, as the listed market cap on the exchange expands with every IPO: every IPO today sets up large block deals around a year later. In fact, in a number of cases, block sizes have ended up larger than the IPO itself, since blocks happen at a discovered price over time.
When we say QIPs and blocks are set to rise, what’s driving that?
In a block/QIP, investors usually know the company well—it’s been listed for years, the price is transparent and there’s immediate liquidity with no lockup. That makes it far quicker than IPOs.
Blocks are pure monetization—exits (partial or full) for founders or PE, shifting equity from private to public markets and enabling entrepreneurship by proving exits are possible. QIPs, by contrast, fund capex, growth, or balance sheet needs—supporting lending in financials and growth capital elsewhere.
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We’ve been seeing a lot of market action around lock-in expiries. Is the end of lock-ins a key event that potential investors watch closely?
Lock-in expiry is a key market trigger. Anchors unlock in two tranches—half after one month and half after three months of allotment. The big event is six months post-IPO allotment, when the PE lock-up expires.
What are the risks, actually?
If a large issuer misprices and destabilizes the primary market, that’s a different risk than a sudden market free fall. Right now, the challenge is more about earnings catching up to price growth. Of course, the usual risks around geopolitics and tariff impact remain.
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