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More IPOs likely to return in 2025 after shorter year in 2024: Citi

Felicia Tan
Felicia Tan • 10 min read
More IPOs likely to return in 2025 after shorter year in 2024: Citi
Hyundai Motor Co’s Indian unit could raise as much as US$3.5 billion from its IPO, making it India’s largest IPO on record. Photo: Bloomberg
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A perceived peak in interest rates has led to more companies thinking about going public, says Udhay Furtado, Citi’s Asia head of equity capital market origination and solutions.

“We have seen, in the last five months, that there has been an opening of the issuance windows… We’ve seen IPO activity, certainly in the US, but increasingly seeing a stronger pick-up in other markets as well,” he adds. 

While there were a handful of large, well-known issuers that were testing the markets by the end of last year, Furtado notes that there are “firmer legs to that now”, which is “obviously correlated” to issuers’ view that there is a “turn” in the interest rate environment.

“I think that people feel that we are in the zip code of peak rates. We may be up or down 25 basis points, but we’re in that zip code,” he notes. “There’s clearly a little bit more comfort and risk appetite to come back into this asset class, which is helpful and something we’re seeing.”

According to EY’s Global IPO Trends report for 1Q2024, global IPO volumes for the quarter fell by 7% to 287 deals, although global proceeds from these deals increased by 7% y-o-y to US$23.7 billion ($33.2 billion). Issuers were already showing “signs of vigour, with an upswing in IPO activity”, said EY in its release on April 8.

However, Furtado is cautious about declaring a full reopening, citing regional disparities for one.

See also: Hong Kong-traded CK Infrastructure, backed by Li Ka-shing, mulls second listing in London

“If you look at it, [the rate of companies going public] is happening at different speeds and in different regions… where the headwinds and challenges faced by certain markets will start to look different compared to the others,” he notes. “Obviously, we are in a region which is probably behind other markets and we’ve also had the slowdown in China to contend with.”

The uncertainty of the pace of rate cuts by the US Federal Reserve is also another factor behind Furtado’s reticence. 

From the initial expectation of six rate cuts at the beginning of this year to the Fed’s signal of one rate cut after the two-day Federal Open Market Committee meeting on June 12.

See also: IPOs in Southeast Asia and Singapore fell y-o-y in 1H2024: Deloitte report

“While the market was expecting rate cuts at the start of the year, it didn’t happen, and there continues to be a debate as to whether there will actually be a rate cutting cycle,” notes Furtado. However, should the Fed begin to cut rates, that will spur a broader reopening, he adds. 

2025 the year to look at

With this in mind, companies are already looking to prepare for their IPOs, which could take about a year to prepare for.

However, Furtado notes that most of these companies may go public only in 2025, with 2024 being a shorter year due to the number of elections taking place around the globe.

The year 2024 is particularly notable due to the number of elections that are happening across at least 97 countries, including Taiwan, Indonesia, South Korea, the EU, the UK and the US.

“People will be thinking about 2025. We do see a lot of issuers looking at 2025 as a time to be coming back,” he says.

At this point, Furtado sees pent-up demand for a “tremendous number” of such companies sitting in the private markets and waiting to go public.

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“We’ve basically been closed for about two years for IPOs compared to peak activity levels in 2021… We expect most of [these companies] to start getting ready now. In the US, they’re definitely starting to come,” he says.

In Singapore, there is also a list of private businesses waiting in the wings. Singapore-based used car marketplace Carro, for instance, is ready for an IPO, said its CEO Aaron Tan in an April interview with Bloomberg. However, whether the company goes public or not depends on the broader macroeconomic environment, he added. At the time, the company sought to raise some US$100 million, which could increase its valuation to over US$1.5 billion.

Anticipating Asia’s growth surge

Citi, which stood as the top underwriter for equity capital markets in Asia ex-Japan for the first half of 2024, noted that equity capital market issuances remain robust particularly in markets such as India, South Korea and Taiwan, which accounted for most of the deal volume in Asia in the quarter.

This, however, comes in contrast to EY’s Global IPO Trends report for 1H2024, which found that IPOs from the Asia Pacific region fell to 216 deals with US$10.4 billion raised, 43% and 73% lower y-o-y respectively, due to the lower number of in mainland China and Hong Kong. Nevertheless, Furtado is upbeat on the region’s prospects.

“Asia is behind right now because we do have a slight China overhang, so… we need China to be firing for the region to be at the same parity as the US, where there’s more issuance, more companies coming to market,” he says.

However, Furtado remains “very bullish” about the Asia prospect as the region continues to have the largest number of companies that are being formed here.

“We’re very excited about that pipeline that’s finally coming back. People have been working through private pipelines for a few years now. There are some very big companies in Asia that are private. That’s going to be exciting. They are global index impactful companies, US$100 billion-plus companies that are coming. So it’s very interesting to see how that unfolds.”

He also notes that the region has an underlying growth trend in its demographic which is “helpful”. 

“Countries and regions like India, Asean and Indonesia are going to be the biggest drivers of growth globally. But if you overlay that with the corporates that we have, the innovation we have, the number of companies that are going to be formed here, it’s quite exciting,” he says.

India alone has been an “extremely strong” country for IPOs. According to a Bloomberg article dated June 1, IPOs in the country had raised some US$3.9 billion so far in 2024, more than twice the amount raised in the same period in 2023. The amount is also higher than the combined sum raised in South Korea and Hong Kong, according to data compiled by Bloomberg.

To be sure, the year’s largest IPOs are still in the works, with the IPO of Hyundai Motor Co’s Indian unit set to be the largest ever. The company is eyeing a record US$3.5 billion from its listing. According to Bloomberg, the IPO pipeline in India is expected to raise around US$100 million or more.

To Furtado, India’s “off the charts” numbers are likely due to the country’s macro growth, the number of private companies that are doing well, and the strong domestic capital, which has led to a “very large swing” in the market.

The bank is also starting to see “a lot of activity” in Taiwan, which is another strong market thanks to the hardware supply chain as well as the demand for semiconductors on the back of the growth in demand for artificial intelligence (AI). 

While the rest of the markets are not heating up as much as India and Taiwan just yet, Furtado says the bank is beginning to see activity come through from the other markets now.

“We had about US$9 billion dollars of issuance in China [the week before May 31] and we did US$7 billion of those. We did US$5 billion of convertibles for Alibaba Group Holding. We also served as sole financial advisor to Lenovo Group’s strategic collaboration with Alat, a newly formed subsidiary of the Public Investment Fund of the Kingdom of Saudi Arabia, whereby Alat is investing US$2 billion in Lenovo via a convertible bond,” he says. “Those are sizeable financings coming into China, where again, a few months ago, people were wondering when we’d see volume come back. So there’s activity picking up all across the regions.

“In Asia, we continue to see very strong companies coming through the private route and then into the public markets. And there’s a tremendous pipeline across the region. We’ve got very innovative companies, tech, consumer, energy transition, healthcare [firms]. They’re all capital consumers, they all need capital, and they will generally be the types of companies that will come through us.”

Even though the IPO market in the US and even Europe has been heating up with the listing of big and recognisable names such as Reddit and data management company Rubrik, Furtado notes that is part of the story that Asia has yet to see yet, apart from India, which has a huge IPO pipeline.

However, he sees more IPOs happening in Asean, with plenty of companies — such as fintechs, tech businesses as well as energy transition companies — which are still in the private domain.

Even though India is in the spotlight at the moment, Furtado sees countries like Indonesia and Vietnam exhibiting strong growth with big companies emerging out of these countries within the next one or two years.

“There are great companies out there that just haven’t come to the market. If you look at the Philippines — which is one of those countries that has very strong GDP growth, a great demographic and a young population — its companies are exhibiting strong growth and there is innovation and disruption,” he shares. 

“Some of those fintech companies in the Philippines are very sizeable businesses. Some of the most sizeable with the best growth in the region are in countries like this. People will get excited as they see these in the public domain,” he adds.

In Singapore, there will be another window of opportunity where Furtado sees interesting companies coming back. However, he notes that the exchange also needs to recognise that a lot of the local markets have developed since. “We still need to find, like what we have in REITs, where we have a global competitive advantage. We need to find places where the SGX has that edge.”

Listing factors

When asked about the key factors to consider when advising companies on going public, Furtado notes that the focus has shifted towards sustainable growth compared to the past when people were simply chasing growth.

“Growth is always a little bit correlated to interest rates. As we get into a period of monetary loosening, you should see more growth come back to the market. But I would say, the consensus is, you have to be profitable and have some sustainability around profit and some balance between profit and growth,” he says. “Obviously the scale of the businesses is important, too. For international investors, they want to see scale and they want to see how large the addressable market of the company is.

“What else do we look for? Basic things: governance, strong management teams. People are excited by visionary founders in the equity market. People like to see that.”


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