The impact of rising rates and Trump tariffs on the IPO market has been a topic of concern among issuers, merchant bankers, and investors worldwide. With market volatility on the rise, coupled with increasing US interest rates and the uncertainties brought about by the Trump administration’s trade policies, the landscape for initial public offerings seems to be shifting.
According to Venkatraghavan S, Managing Director of Investment Banking at Equirus, there may be a temporary slowdown in IPOs due to market volatility. Global funds, in particular, have been selling off in recent months, leading to concerns about their active participation in the Indian market, especially for issues over ₹3,000 crore where foreign investment plays a crucial role. Pranjal Srivastava, Partner in Investment Banking at Centrum Capital, highlighted that the rising US interest rates and Trump’s policies have created a sense of uncertainty among foreign investors, making dollar-adjusted returns less attractive.
The recent trend of overseas investors pulling out ₹1.55 lakh crore from the secondary market in the December quarter while investing about ₹30,000 crore into IPOs reflects the cautious approach being taken. Srivastava mentioned that long-only Foreign Portfolio Investors (FPIs) may still show interest in IPOs, but the current market conditions could make it challenging for them to make investment decisions. Trump’s policies are also adding to the complexity, creating uncertainties for companies in certain sectors and making it harder for bankers to price deals amidst the market volatility.
Tempering valuations in the IPO space is another key concern. Companies that rely heavily on the US market for revenues or raw materials are now assessing the potential impact of Trump’s policies on their financials. Venkatraghavan noted that IPO valuations are likely to be more conservative moving forward, especially in the mid and small-cap segments. The correction in valuation numbers due to recent market adjustments is prompting promoters and private equity players to reevaluate their strategies and consider potential hits to their bottom line.
Pranav Haldea, Managing Director of PRIME Database, suggested that while smaller issuances backed by domestic investors may still proceed, larger offerings requiring overseas support could experience a pause until market conditions stabilize. Despite the ongoing market volatility since September, the IPO pipeline and launches have remained resilient. The sentiment around IPOs tends to be affected when the market is bearish or overly volatile, but there is optimism that once the market settles, IPO activity will bounce back.
In conclusion, the fundamentals of the Indian market remain strong, and investor interest is expected to endure unless there is a significant economic slowdown. While challenges lie ahead due to rising rates and trade uncertainties, the resilience of the IPO market suggests that opportunities for growth and investment still exist. The key for stakeholders will be to navigate these uncertainties with caution and strategic planning to weather the current storm and emerge stronger in the long run.
