Many upcoming public issues are preparing to enter the Indian share market. Mukesh Ambani wants to launch the initial public offering Jio IPO this year. Quick-commerce firm Zepto IPO filed new documents for a 1 billion dollar public issue. A prominent asset manager, a gold loan company, and the biggest stock exchange in India also want to sell shares soon.
However, market expert Ashish Gupta advises retail investors to remain very careful about giant public offerings. He previously wrote the famous “House of Debt” report in 2012 at Credit Suisse to warn about corporate bankruptcies. Gupta recently stated in Livemint that historic record-breaking public issues usually happen when the stock market reaches its highest peak.
Past financial data shows a clear trend. Anil Ambani brought the Reliance Power IPO in 2008, and the Nifty 50 index lost half its total value just a few weeks later. The huge Coal India public issue in 2010 also came right before a 30 percent market drop. Similar events happened globally when Visa listed in 2008 and the Agricultural Bank of China listed in 2010. Massive share sales absorb the final investable cash from the system, which causes secondary market prices to fall down.
The financial condition in the Indian banking system is already tight. Loan distribution is growing 4% points faster than deposit growth, which stands at 12%. Large public issues pull critical capital out of regular bank deposits.
To help the banking system, the Reserve Bank of India (RBI) decided to pay the hedging expenses for banks that collect money from non-resident Indians. This step can bring around 50 billion dollars into Indian banks. This extra money will eventually enter the stock market and can help local institutions buy Jio’s expected 4 billion dollar share float.
Global stock markets currently show high interest in massive technology shares. SpaceX recently raised 75 billion dollars through its IPO. Alphabet successfully increased its share sale to 85 billion dollars. Tech giants like OpenAI and Meta Platforms might also sell shares soon. This global trend gives confidence to Indian firms because Jio Platforms operates in data transmission, e-commerce, and media entertainment.
Jio Platforms has 525 million subscribers who consume a massive amount of data every year. The company earns 15 billion dollars in operational revenue. Its operational profit margin stands at 52%. Share market experts value the complete business at around 130 billion dollars.
Foreign investors are currently moving money away from emerging economies due to high stock valuations. Foreign institutions sold more than 37 billion dollars of Indian shares over the past year.
Big Silicon Valley firms like Google and Meta invested in Jio during the pandemic in 2020. Today, global funds want to invest specifically in artificial intelligence (AI). Mukesh Ambani plans to offer low-cost AI tools through a partnership with Meta. Jio also wants to distribute AI-created fantasy and mythological media stories. However, international investors do not find this basic AI model attractive yet. Therefore, the Jio IPO will depend mostly on domestic retail savers.
Disclaimer: Share market investments contain structural financial risks, and mega public issues can impact overall market liquidity. Investors must read all offer documents and check their financial capacity before applying.
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