Valuations in India may remain elevated, but with the structural and fundamental story remaining bullish and geographic opportunities across Asia diversifying into a broader range of investment destinations beyond China, domestic capital markets may see the IPO party continue into 2025 with another banner year . of primary issues, said a senior Goldman Sachs executive. Deal-making through mergers and acquisitions (M&A) will also accelerate globally, he said.
In 2024, deal volumes in India’s equity capital markets – initial public offerings, QIPs, block sales – more than doubled from the previous year to $71 billion, putting the country second only to the US.
“India accounted for around 11% of global volumes, up from 5% the year before,” said Iain Drayton, head of investment banking Asia (ex Japan) at Goldman Sachs. “I expect significant follow-up and blocking activity in 2025. If market conditions allow, this should be another record year for Indian IPOs. If all goes well, IPO volumes in 2025 should again be more than double those in 2024.” Drayton oversees key markets such as India, Greater China, including Hong Kong and Taiwan, as well as South Korea and Southeast Asia.
Beijing’s recent fiscal stimulus measures to boost domestic growth and demand may have opened a window of opportunity not seen in recent years. Goldman Sachs took three Chinese companies – Horizon Robotics, SF Express and Pony AI – public at the end of last year. But it is still far from the peak of five years ago.
“My expectation is that this window extends into 2025, but it is far too early to conclude that China is definitely back,” Drayton said, pointing to a larger trend playing out in recent years.
Although the total issuance volume has declined since 2021, the percentage of Chinese listings has also declined. Smart money, raised and initially earmarked for China’s public and private markets, is being diverted to other markets in the region, notably India and Japan, followed by Taiwan, ANZ and Korea. “If you just look at private equity (PE) in the private markets, the pace at which general partners (GPs) are focusing more on India, Japan and ANZ is striking,” he said.
Drayton, AGE, an avid Manchester United supporter is of English-Trinidadian descent and has spent half his life in Asia. In addition to being head of investment banking, he also leads private equity or financial sponsorship coverage for Goldman Sachs in the region.
But comparing capital flows from India and China is too simplistic and they are not necessarily mutually exclusive, he said. Since the beginning of 2021, flows from foreign institutional investors into India have totaled just $8 billion, compared to $133 billion in domestic flows. Equity capital market (ECM) volumes during that period were approximately $160 billion. Drayton highlights that foreign institutional investors typically participate in ECM deals to gain exposure to India and that over $12.9 billion of global money has been invested in ECM transactions in 2024 alone, even if there are periodic net outflows on the secondary market has taken place.
After the general elections last summer, which brought Narendra Modi to power for the third time, it was only in October and November that investors pulled out a total of $13.5 billion. Except for these two exceptional months, foreign flows were actually net positive in the June-December period. Regardless, India Inc.’s slower corporate profits. or declining demand, Drayton said that “it’s not just a rotation from India to China.”
In the medium and long term, there are plenty of Indian opportunities for global funds to evaluate and participate in. “I would expect them to continue to join the Indian growth story,” he said. “But I also think that China currently offers an interesting buying opportunity. The path will likely be non-linear.”
Deal files
Blockbuster gains in US stocks in 2024, expectations that President-elect Donald Trump will cut regulations and taxes, and further easing of monetary policy by the Federal Reserve after three consecutive cuts in late 2024 all raise hopes for dynamic dealmaking in 2025 increase. Drayton, this will likely be driven by three key considerations: sponsors seeking liquidity, transformational corporate-led mergers and acquisitions, and industry-disrupting technology.
Dealmakers expect a wave of US IPOs after the drought of the past three years, due to a sustained campaign by the Federal Reserve for sharp rate hikes in early 2022. Dealogic data shows US listings will raise just $32 billion in 2024, excluding acquisition companies for special purposes. a fifth of the 2021 peak of $150 billion.
According to a Goldman Sachs 2025 M&A Outlook white paper, 47% of clients surveyed around the world believe that strategic growth and the addition of new capabilities will be the main drivers of mergers and acquisitions this year. “We see that investors are no longer taking a wait-and-see attitude, but are actively deploying capital in the different regions,” the report said. “In this sense, as global M&A momentum continues to increase in 2025, we expect inter-regional dealmaking to continue to grow in both depth and breadth, again in a non-linear manner.”
Flows between the US and Europe have seen a strong boost, Drayton said. But the resurgence of inter-regional M&A in Asia, which will account for approximately 30% of global transaction volume by 2024 and generated $150 billion in announced M&A transactions in September alone, is particularly encouraging.
“Even as China’s largest market has seen a decline in overall M&A volumes in recent years, other countries have begun to fill the vacuum,” he said. “In 2024, Japan experienced particularly strong growth, with M&A volumes increasing by more than 30% year-on-year. In addition to continued demand for cross-border transactions, corporate governance reforms and new government guidelines on corporate takeovers are expected to drive momentum domestically.”
The M&A story in India remains equally strong, accounting for approximately 20% of Asia (ex-Japan) volumes in 2024.
To support this increased activity, Goldman Sachs, which established its Mumbai office nearly two decades ago in 2006, has expanded its on-site team with staff overseen by CEO Sonjoy Chatterjee. In July, it appointed Sudarshan Ramakrishnan and Devarajan Nambakam as co-heads of investment banking.
“The fact that we held our board meeting here in June 2023 underlines how important India is to our business,” said Drayton.
Sunil Khaitan joined as Managing Director and Head of Finance in India.
“Companies with Western corporate governance that benefit from strong macroeconomic trends in India are seeing high valuations and attracting significant foreign capital,” Drayton said. “Many multinational companies are taking advantage of valuation gaps through the capital markets by spinning off or listing their Indian subsidiaries, or consolidating through mergers.”
In November, Reliance Industries and Walt Disney completed an $8.5 billion merger of the latter’s Indian media assets with Goldman as advisor.
Globally, increased ECM activity ultimately leads to more mergers and acquisitions. “We expect more global strategies will increasingly focus on entering India or expanding their presence through joint ventures, acquisitions, financial investments or strategic investments,” Drayton said.
Sectors that support high demographic development and mass consumption will continue to receive attention. These include healthcare, consumer and consumer derivatives, export-oriented businesses (IT services), infrastructure, real estate and renewable energy sources, along with financial services.
“India was also one of the few global markets to see significant exits by private equity investors in 2024, further catalyzing deal activity,” Drayton said.
PAG acquired Manjushree Technopack from Advent International, another PE fund, for $1 billion; Goldman was the sellside advisor. “The broader momentum in India signals a rising tide,” Drayton said.
