Part 19 - History,Timeline of Initial Public Offerings in India and Globally
Part 19 - History,Timeline of Initial Public Offerings in India and Globally
The Evolution of IPOs: Global and Indian Timeline with Facts
History of Initial Public Offerings (IPOs) in India and Globally
An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time, transitioning to a publicly traded entity.
This allows companies to raise capital for expansion, debt repayment, or other objectives while providing investors opportunities to own stakes in growing businesses.
The history of IPOs reflects economic, regulatory, and market developments both globally and in India.
Global History of IPOs -
Origins (17th Century):
The concept of IPOs traces back to the early modern period.
The Dutch East India Company (Vereenigde Oost-Indische Compagnie, VOC) conducted the first modern IPO in 1602, issuing shares to the public to raise capital for its trading ventures.
This marked the birth of the public stock market in Amsterdam, allowing investors to trade shares freely.
The Dutch East India Company (VOC) conducted the world’s first public share offering in August 1602, making it the pioneering IPO in history
Their offering was open to every Dutch citizen, with no minimum or maximum investment, essentially democratizing capital investment .
Shares were later tradable through secondary markets, giving birth to what would become the Amsterdam Stock Exchange, the world’s earliest securities exchange
This model was innovative, as it allowed widespread public participation in corporate ownership, setting a precedent for future public offerings.
The IPO had been announced in the VOC charter—the company’s founding document of March 20, 1602. "All the residents of these lands," stated article 10, "may buy shares in this company."
Subscribers could decide for themselves how much to invest; there was no minimum or maximum
18th–19th Century:
IPOs became more common in Europe and the United States with the rise of industrialization.
In the U.S., the Buttonwood Agreement of 1792 laid the foundation for the New York Stock Exchange (NYSE), enabling organized securities trading.
Companies began issuing shares to fund infrastructure projects like railroads and canals.
Early U.S. corporations often used direct public offerings (DPOs), selling shares directly to investors without intermediaries like investment banks, as noted by financial historians Richard Sylla and Robert E. Wright.
20th Century:
IPOs became a major capital-raising mechanism during the 20th century.
The U.S. saw significant IPO activity with the growth of industrial and technology sectors.
The dot-com boom (late 1990s) led to a surge in tech IPOs, with many internet startups going public despite lacking profits.
This speculative frenzy culminated in the dot-com crash (2000–2002), reducing IPO activity.
The 2008 global financial crisis drastically reduced IPOs, with only a handful of companies going public due to market uncertainty.
Recovery was slow, with fewer listings in subsequent years.
Notable global IPOs include Saudi Aramco (2019), which raised $25.6 billion, the largest IPO ever, and Alibaba (2014), which raised $21.8 billion.
21st Century Trends:
Post-2008, IPO activity rebounded with economic recovery, particularly in tech and emerging markets.
The 2021 IPO boom saw record global listings, driven by low interest rates, stimulus packages, and investor optimism post-COVID-19.
However, 2022–2023 saw a decline due to inflation, rising interest rates, and geopolitical tensions.
Alternative IPO methods, like Dutch auctions and direct listings, emerged, though traditional underwritten IPOs remain dominant.
Special Purpose Acquisition Companies (SPACs) also gained traction in the U.S. as an alternative to traditional IPOs.
Globally, markets like the U.S., China, and India have led IPO activity, with India surpassing the U.S. and China in 2024 with 327 IPOs raising $19.9 billion
History of IPOs in India -
Pre-Independence and Early Years:
The roots of India’s IPO market lie in the establishment of the Bombay Stock Exchange (BSE) in 1875, one of Asia’s oldest stock exchanges.
Early public offerings were limited, primarily for colonial enterprises or trading firms.
Post-independence (1947), India’s capital markets remained underdeveloped, with few companies accessing public funds due to a tightly controlled economy.
1970s–1980s: The Dawn of Modern IPOs:
The first significant modern IPO in India was by Reliance Industries in 1977, led by Dhirubhai Ambani. Oversubscribed seven times, it introduced the “equity culture” to Indian retail investors, transforming the perception of stock market investing. This is widely regarded as a watershed moment in Indian financial history.
Before the establishment of the Securities and Exchange Board of India (SEBI) in 1988, IPOs were less regulated, leading to some speculative issues.
Reliance’s IPO occurred in this pre-SEBI era, highlighting the need for regulatory oversight.
1990s: Liberalization and Growth:
India’s economic liberalization in 1991 opened the economy to foreign capital and private enterprises, spurring IPO activity. The creation of SEBI in 1992 introduced stringent regulations, enhancing transparency and investor confidence.
The 1990s saw a wave of IPOs as private companies sought public capital. However, some IPOs were overpriced or speculative, leading to post-listing crashes.
2000s: Maturing Markets:
The early 2000s saw a mix of successes and failures.
The dot-com boom influenced tech IPOs globally, but India’s tech listings were more cautious.
ONGC’s IPO (2004) raised over ₹10,000 crore, a record at the time, showcasing India’s growing capacity to absorb large public issues.
The Reliance Power IPO (2008), despite massive oversubscription (73 times), debuted poorly due to the U.S. subprime crisis, reflecting global market volatility’s impact.
2010s: Regulatory Reforms and Tech Boom:
SEBI introduced reforms like the Application Supported by Blocked Amount (ASBA) system and mandatory electronic IPO applications, streamlining the process.
The 2010s saw IPOs from diverse sectors, including financial services (e.g., SBI Cards, 2020) and tech startups.
The Zomato IPO (2021) was a landmark for Indian tech, oversubscribed and signaling the rise of “new-age” tech companies in public markets.
2020s: IPO Boom and Global Leadership:
Post-COVID recovery in 2021 led to a record number of IPOs globally and in India, fueled by retail investor participation, favorable regulations, and economic stimulus. India saw 243 IPOs in 2023, a 65% increase from 2022.
In 2024, India led global IPO activity with 327 IPOs raising $19.9 billion, surpassing the U.S. (183 IPOs) and Europe.
Hyundai Motor India’s IPO, raising $3.3 billion, became India’s largest ever.
SEBI’s reforms, like reducing listing timelines from T+6 to T+3 days and mandating ESG disclosures, boosted market efficiency and investor confidence.
Recent IPOs like Swiggy (2024) performed well, reflecting robust retail and institutional interest despite cautious market sentiment.
Key Differences and Trends
Global vs. India:
Globally, IPOs have been driven by large markets like the U.S. and China, with tech and energy sectors dominating (e.g., Saudi Aramco, Alibaba). India’s IPO market, while smaller in value, has seen higher volume due to SME listings and retail participation.
India’s regulatory framework under SEBI is stricter than some global counterparts, emphasizing investor protection, which has built trust but can delay listings.
Pricing Methods:
Globally and in India, IPOs use fixed price or book-building methods. Fixed-price IPOs, common in India historically, set a single share price, while book-building, now dominant, allows price discovery based on investor bids.
Challenges:
Globally, IPOs face volatility from economic crises (e.g., 2008, 2022–2023). In India, oversubscription and post-listing price crashes (e.g., Reliance Power) highlight speculative risks.
Underpricing, common globally, leads to “IPO pops” but reduces issuer capital. In India, SEBI’s oversight mitigates this but doesn’t eliminate it.
India had the highest number of IPOs globally in 2023 & 2024 (300+ IPOs/year)
Photo - The Dutch East India Company (VOC)
