NEW DELHI: Radhika Gupta, the CEO of Edelweiss Mutual Fund and a respected voice in India’s financial landscape, provided her expert perspective on the state of initial public offerings (IPOs) in India. Speaking with Rohan Dua, Executive Editor of The New Indian, Gupta discussed the critical role of IPOs in supporting economic growth, balancing domestic and foreign investments, and addressing concerns around investor confidence.
During the interview, Gupta underlined the dual importance of supply and demand in the IPO market. Historically, she explained, India’s equity market relied heavily on foreign investors. “At some point, if you look at 2008, our capital markets were very dependent on foreign investors,” she shared. This dependency made the markets vulnerable during global downturns.
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In a marked transformation, today domestic institutions and retail investors have surpassed foreign investors in terms of market participation. Gupta highlighted, “Today, if you look at domestic institutions like us plus normal retail investors, collectively we are bigger than foreign investors. This is a very big thing.” She attributed this shift in part to the surge in SIP (Systematic Investment Plan) investments, which now account for ₹22,000–23,000 crore monthly, or over ₹2 lakh crore annually.
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This growing base of domestic capital, she believes, is essential for India’s financial stability, as it cushions the market during global crises. “Whenever there is a global crisis, market reactions are much less sharp because to absorb foreign selling, domestic buying is very important,” Gupta explained.
Gupta also emphasized the untapped potential of India’s IPO market. With demand exceeding ₹3–4 lakh crore annually from mutual funds, AIFs, and PMS platforms, the current IPO issuances—standing at ₹1–1.5 lakh crore—are significantly below market capacity. “I actually think the IPO market has to grow because the demand today is significantly larger than the supply,” Gupta remarked.
She drew attention to India’s vibrant startup ecosystem, many of which were funded by private equity and are now reaching a stage where IPOs become necessary for private equity exits. “These companies have grown big enough, and private equity exits will naturally happen through the IPO market,” she stated.
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Addressing concerns raised by investors around founders exiting companies during IPOs, Gupta acknowledged the validity of these fears but urged for a nuanced perspective. “What worries people is that a company is loss-making, but the founder is taking the exit first. That is a worrying thing,” she said.
However, Gupta pointed out that IPOs should not be dismissed outright if a profitable company seeks to raise capital or provide partial exits for founders. “If you have made a good profitable company, the founder has 20% stake, he has made 3-4% money in the IPO and he has worked in it for 10 years, that’s fair,” she explained. Gupta underscored the importance of evaluating each IPO individually, saying, “We look at every IPO from a different perspective. If he is doing it to raise capital, that is very easy. We look at each IPO very carefully.”
Gupta concluded the discussion by advocating for the broader financialization of India’s economy, a process she sees as essential for long-term growth. “In India, financialization is necessary. It has happened in China and the US. This is a very good thing. We should promote it,” she stated.
Despite the growing SIP base and domestic capital pool, Gupta stressed the need to continue attracting all forms of investment—domestic and foreign alike. “We should get capital from any place, but we should get all kinds of capital,” she affirmed.