Markets Brace for a $5 Billion IPO Rush
Foreign institutional investors sold relentlessly for yet another month
On Episode 695 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajit Dayal, founder at Quantum Advisors as well as Vinit Bolinjkar, Head of Research at Ventura Securities Ltd.
SHOW NOTES
(00:00) The Take
(06:26) Markets brace for a $5 billion IPO rush even as regulators smoothen the path
(09:40) Domestic institutional buying is moderating
(16:44) Gold prices hit fresh highs
(17:13) Oil prices are falling as fears of a glut rise
(18:20) A changed tax rule for NRIs is keeping more of them out and causing a revenue loss to the country
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday, the 6th of October and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, currently witnessing intermittent rains and a monsoon that's yet refusing to go away.
The Take: Ease Of Doing Business Within Government As Important As With It
On October 8th, India's Prime Minister Narendra Modi will inaugurate a new airport outside Mumbai, the Navi Mumbai International Airport.
But operations at the new airport will only start in December, we are being told. So why the inauguration now? Speaking as a selfish Western Mumbai resident, the Honourable Prime Minister might as well inaugurate the airport a year or two later because that's when the crucial 4.5-kilometre four-lane elevated corridor East-West Connector, as it's called, is supposed to be ready. Now, this road will link the western parts of Mumbai, including the city's pride, the coastal road with the ambitious Atal Setu Sea Bridge, which presently connects Mumbai's desolate eastern corridor with the mainland, and Ulve, the area where the new airport is located.
The 21.8-kilometre bridge is quite an achievement, not just for its engineering smarts, but also the relatively shorter time taken to build, which is six years, including the COVID period. But reaching the bridge for anyone in the western part of Mumbai is a mighty challenge and includes navigating choked, narrow streets and potholes which were never designed, as in, the roads were never designed to act as cross-city arterial connectors. Hence my plea to postpone the inauguration by two years.
Maybe one is being unduly pessimistic. So let's see what was promised. On August 4th, or two months ago, the Maharashtra Chief Minister, Devendra Fadnavis, said the connector would be ready in a year's time, which is not a bad timeline in itself, though that has been subsequently revised to January 2027.
But is that also feasible? Because in June 2024, Mr. Fadnavis's junior colleague and State Deputy Chief Minister, Ajit Pawar, said the same connector would be open for traffic by the end of December 2025. We are, of course, in October 2025. As always in infrastructure, it's sometimes useful to see what the journey so far has been.
First, construction for this connector actually started in 2021, which was four years ago. And all you see now is abandoned pillars and half-blocked roads. Though this was planned, by the way, in 2013, precisely for this purpose, that is to connect into the trans-harbour link or Atal Setu, where the Atal Setu itself was delayed, even as the connector project was revived in 2016.
Anyway, let's assume now that all ministers concerned have summoned all the powers at their command to push through this project. But what about the railways over whose lines the bridge will pass in central Mumbai? Well, the Hindustan Times reported last week the Indian Railways has raised a red flag, warning it will not allow the project to proceed until its demand for way-leave charges is approved. By the way, there is no bridge in Mumbai the railways will not block, as history has shown.
Bridges over railway lines in Mumbai with two to three-year construction timelines, in themselves unpardonable in this day and age, end up taking anywhere between six to seven years. Now, the argument here is that the Maharashtra Rail Infrastructure Development Corporation or Maharail, which is executing the project, will need to use railway land to construct the new state-of-the-art double-decker flyover. Now, for this, the railways are due way-leave charges, which is effectively rent for the project's estimated two-year duration, according to that Hindustan Times article.
While the Central Railway is asking for 10 crores of rupees, the Western Railway is asked for about 59 crores of rupees from the Maharail, a sum which is yet to be approved by the Mumbai Metropolitan Region Development Authority, MMRDA, which has contracted the project to Maharail, which in turn is a joint venture between the state government and the Indian Railways. The further mechanics of this only gets a little more depressing as you read further, but the railways is run by the same party which runs the state government of Maharashtra, and we often hear that such a combination is a winner when it comes to quick project execution. The most unfortunate part of this is that officials at Adani airports, despite gushing newspaper reports that carefully leave out the lack of connectivity, must be tearing their hair apart at the delays in this bridge, because it will be tough to get the airport truly operational unless, of course, most flights take off or arrive between 2 a.m and 8 a.m, give or take, the band during which most west-based residents can hope to reach in good time and hopefully help.
Incidentally, the Navi Mumbai Airport too is delayed, given that it was proposed around 1997, got approvals in 2007, but faced several delays and hurdles along the way, including for land acquisition. But anyway, once again we're here in 2025 with a spanking new tech-savvy airport and very few roads connecting to it, particularly once again just to remind you of the highly dense western Mumbai. On the other hand, Mumbai's main airport terminals in Santa Cruz and Andheri have been linked by a world-class new metro line, the full operations of which will also start in a week or two.
Presently the metro line runs more than halfway into South Mumbai, so the existing airport, also run by the Adanis, has even better connectivity than before, while the newer one is obviously struggling for it. Funnily, the metro line has been built by the same government, which has been struggling to get the railways and the bridge or connector builders into a room and sort things out. Mumbai's metro has been delayed by several years, but that was clearly a more complex engineering task to execute, given that several critical parts of it run underground across Mumbai's north-south axis.
There are several lessons here. First, of course, infrastructure timelines in India never stand, almost all the time. By extension, intermodal planning may be good on paper, but fails on ground.
Ease of doing business is not just for the private sector, it's equally applicable to dealings within government, whether in this case involving the railways or elsewhere. And clearly, internal turf wars can bring the most noble intentions to a grinding halt. Conversely, if we can't achieve ease of doing business inside the government, then doing so outside is a much tougher call.
And finally, for reasons clear and unclear, maybe building underground in India is more efficient than on ground.
And that brings us to the top stories and themes.
The stock markets are bracing for a $5 billion IPO rush, even as regulators smoothen the path.
Domestic institutional buying could be moderating.
Gold prices are hitting fresh highs, even as oil prices fall as fears of a glut rise.
And a changed rule for non-resident Indians is keeping more of them out and causing a revenue loss to the country.
Markets Brace For An IPO Rush
Foreign institutional investors sold relentlessly for yet another month, about $2.7 billion in September net, that's adding up to about $17.6 billion this year. Now, the reasons for this are broadly known, including tariff uncertainties and high valuations.
But these are only some of the recent ones as the selling has been going on for much longer. China is undoubtedly sucking up a lot of emerging market funds looking for bigger returns, which are usually found in technology stocks in recent years all over the world. And China, of course, has quite a few.
On the other hand, India is seeing an unprecedented IPO rush with some $5 billion worth of IPOs lined up this month. Many of these stocks will languish after the list, as recent history shows, because the pricing is aggressive and the fundamentals oftentimes weak to start with. But for investors, including venture capital promoters and founders, this is a golden opportunity of the likes not seen for a while and may not be seen at the same intensity for some time.
$2 billion plus IPOs, including this year's biggest, will start taking orders from the public in the coming week, says a report from Bloomberg. The offers are from Tata Capital and LG Electronics' Indian arms, says Bloomberg, adding that demand has been fuelled by a strong pool of domestic capital as well as millions of retail investors encouraged by an unprecedented nine-year rally in the benchmark stock index. The $1.7 billion Tata Capital deal obviously offers an opportunity for investors to own shares in a Tata Group company, and there are not too many IPOs or public offers from there.
And this is also said to be the biggest IPO since Hyundai Motors' record $3.3 billion offering last year. The benchmarks are of course down in the last full year, with the NSE Nifty 50 going up only 5% in 2025, while the broader gauge of Asian equities has slimed about 23%, says Bloomberg. Now, Indian promoters and institutional investors, and maybe on occasion companies as well, have raised about $11 billion as the third quarter ended, making India the fourth busiest IPO market this year, according to that Bloomberg report, and last year this figure was $21 billion.
In all of this, the Reserve Bank of India, in a move possibly timed with these bumper IPOs, has allowed the lending limit for financing IPOs to be raised from Rs 10 lakh to Rs 25 lakh per individual. Additionally, the limit on loans against shares will increase from Rs 20 lakh to Rs 1 crore, that's five times. Now, the last time apparently the loan or the limits were increased was 25 years ago, and of course the banking system's ability to manage risk has improved, or so we feel.
The Reserve Bank of India governor last week said that loans against shares and IPO financing existed earlier but were not revised for many years, and it was only natural that these limits be updated. All of this is expected to encourage greater participation by high net worth individuals and deepen engagement in the primary market. Now, the question of course is, did the primary markets need this specific incentive at this time, or is there sufficient liquidity going around, given the fact that demand too is at unprecedented levels? Anyway, so on Friday, the benchmarks closed higher for the consecutive session.
At close, the Sensex was up 223 points to 81,207. The NSE Nifty 50 was up 57 points to 24,894. The broader markets, Nifty Mid-Cap 100 was up 0.8%, and the Nifty Small Cap 100 index was up 0.6%. Now, back to the Reserve Bank of India's announcements on easing up lending to capital market linked activity and IPOs in specific, timed evidently with some big IPOs coming up.
I reached out to Vinit Bolingkar, head of research at Ventura Securities, and I began by asking him how he was reading the latest regulations and a sense on how he was seeing markets ahead.
INTERVIEW TRANSCRIPT
Vinit Bolinjkar: So, one is, you know, earlier the measures were taken to quell the very rapid rise in the stock markets. Now that we are seeing a huge deluge of IPOs hit the markets, there is relentless selling by FIIs and, you know, DII investments or the mutual fund flows have kind of moderated. I won't say that they're down, but they're just a little bit down as can be indicated by the frequency of opening of DMAT accounts, etc.
So, all these things, the government doesn't want to jeopardise the entire setup because, you know, if you have a credit event in the US markets, which impacts the global markets, obviously our markets will tag. And in that case, all these IPOs which are being planned also get hit. So, to keep the liquidity going, we already have 3 trillion of liquidity in the system.
CRR has been cut. And by opening up these credit enhancement, the government is ensuring that the stability of the system is intact and there are no undue fluctuations impacting the shock absorbing capacity of the markets.
Govindraj Ethiraj: But did you get a feeling, I mean, speaking as an outsider, what I mean is outsider to the policymaking part, but an insider in the market, but did you get a feeling that there was a gap in the way people could access finance for investing in IPOs? I mean, people, i.e. people wanted to raise much more money or borrow much more money, but they could not.
Vinit Bolinjkar: There have been a lot of restrictions being imposed on the size of contracts going in the futures market. First, the lending was much more fluent, but now it has been more regulated, going through MTF books or lending against shares being capped. So, there was a little bit of cringing of the borders for investors with animal spirits or who are willing to take more risk.
But now this, that has been opening up, is helping them to access the markets better. Their investments, which they have made, they can leverage those for potential gains.
Govindraj Ethiraj: And I think it is a step forward in the wealth creation there. Right. Let me take a step back and ask you a larger market question.
So, in terms of where we are right now, so the new GST regime has come, tariffs are still hanging over us. So, the markets are looking somewhat undecided in terms of where they want to go. What's your own sense as you look at the next, this quarter, particularly the new quarter?
Vinit Bolinjkar: Let's step back a bit over the last couple of months, what we've been seeing, there's a lot of geopolitical angle to everything that has been put in place. And Trump has been rather disruptive in his mechanics, if I may say so. That has put a lot of investors at risk, because you have these kinds of episodic disruptions that come and the frequency is a few weeks apart and there is too much volatility.
What happens one day is negated the other. So, that kind of unknowing the markets, people are not sure what to do. And our concentration to the US market has been so high in our exports that to diversify that is only taking time.
Right. So, what is happening is that the hit would have been potentially very large. And the H1B is like a democracy sword, because that is a very large industry, 100 billion.
And it has got multiple disruptive events coming in from a dollar debacle to a growth reset in the US markets. All these can severely impact the Indian industry. And although, you know, we've taken some measures on the GST, we're still not out of the woods on that.
So, the CRR cut, the liquidity lap of 3.5 trillion, and a possible rate card going ahead is very, very encouraging to provide shock absorbency potential to the markets. And going out ahead, what I would say is that all these measures are going to help in pushing through rural growth, because it is MSME positive. It is positive to the sector creation PLI.
Third thing is that you are going to empower the consumption which was lacking and the confidence which are lacking in the system. So, add this to the monsoon, a good harvest, and you know, a very benign inflation. So, this is going to take care of your global growth, and to a large extent, address the impact of these factors on the markets.
Govindraj Ethiraj: Right. So, how are you seeing valuations, I mean, either specifically or across the market?
Vinit Bolinjkar: So, valuations are rich, there is no denying that. But I think that we will sustain this valuation premium. I call it the Modi premium because Modi's policies have been enacted to ensure India's only large growth market in a rapidly devolving global economy.
Govindraj Ethiraj: Right. And when you look across the market, do you feel despite the higher valuation, some sectors still have some runway as opposed to others?
Vinit Bolinjkar: So, I think our policy initiatives are going to be very strong for the NBSEs. They are going to give a lot of flip to the infrastructure sector specifically, because risk weights are going down when you segregate operational asset weights versus under construction assets. So, you know, your ability to finance projects which have already been established, you know, get refinanced against them, you know, for projects which have long tenure revenue visibility, there it is going to have a very salutary effect.
Third thing is the M&A potential that has been unleashed and you know, where the banks are allowed to borrow up to 300% of their cap from the global markets, ECBs especially, is providing them the capital for financing, aggressive growth, M&A activity. And I think this will all help the Indian markets to consolidate further and keep the growth sustaining. So, I think these sectors, NBSEs are going to do extremely well, consumer facing notably Bajaj Finance, HDB Financials.
You know, another thing that I would like to point out is that overlapping rules, restricting banks and NBSEs from lending in sectors where they overlap, is also done away with. So, banks like Kotak, HDB Financial, PNB Housing, Scambank Housing, all these stocks are also, you know, going to benefit in another way. So, I think animal spirits for lending, especially to infrastructure and mortgage have been really, really set free and this is going to kickstart the engine of growth.
Govindraj Ethiraj: Right, that's very useful. Thank you so much for joining me, Vinit.
Vinit Bolinjkar: You're welcome.
Gold Is Up Again
Gold prices rose on Friday, again hovering near record highs and heading for a seventh consecutive weekly gain, thanks to growing concerns over the economic impact of a prolonged US government shutdown and expectation of interest rate cuts, according to Reuters, which added that spot gold was at about $3,884 per ounce on Friday after hitting a record high of $3,896 per ounce on Thursday.
Oil Prices Fall
The Organisation of Petroleum Exporting Countries Plus will raise oil output from November, it said on Sunday, and this is a similar monthly increase as in October, even as there are now persistent worries over a looming supply glut, according to Reuters. The group comprising the Organisation of Petroleum Exporting Countries, including Russia and some smaller producers, has increased its oil output targets by more than 2.7 million barrels per day this year, which is about 2.5% of global demand.
All of these shifts in policy after years of cuts are designed to regain market share from rivals such as US shale producers, says Reuters. On the impact of all this, Brent prices are below $65 per barrel as on Friday, and most analysts are predicting a supply glut in the fourth quarter and in 2026 due to slower demand and rising US supply. So in contrast, the current prices, which is below $65, are obviously lower than the peak prices that we saw this year of $82 per barrel, but also above the $60 per barrel mark seen in the month of May this year.
Bringing NRIs Back
Since 2021, the government of India changed the number of days for an individual to be categorised as a non-resident. For taxation purposes, the earlier requirement of spending less than 182 days in a fiscal year in India was amended to less than 120 days.
So if you are an NRI whose total taxable income from India is more than 15 lakh rupees, you should not stay for more than 119 days in India in a fiscal year to protect your NRI status, which means you should be spending the rest of the time outside India. But if your total income is less than 15 lakh rupees during any financial year, you can stay for 181 days as was the case earlier. Ostensibly, this is to control Indians who are living in or are living in Dubai, Singapore and other similar tax-friendly jurisdictions who would maybe run businesses in India, live here and yet not pay taxes to the government because they would be going in and out.
Ajit Dayal, founder of Quantum Advisors, Private Limited and Quantum Asset Management Company, has argued in a recent Financial Express article that since the new rule has come into play, non-resident Indians have actually not surrendered their lifestyle in Dubai or Singapore. In fact, he says these displaced NRIs probably spent the additional 60 days in those external jurisdictions boosting those economies and therefore 60 less days in India and thus India was losing out or is losing out. His point, revert to the simple 182-day rule and eradicate this complexity of resident but not ordinarily resident and proof of a tax residency certificate from a jurisdiction where the individual is resident.
I reached out to Ajit Dayal and I started by asking him why this should be done.
INTERVIEW TRANSCRIPT
Ajit Dayal: So I think it's big, you know, if you really think about the numbers, there are over 4 million NRIs in the U.S. And I'll just go back a bit and sort of translate this to my own history a bit. I went to the U.S. in 1981 for an MBA, and there were 50 people or so in my batch, effectively, from different Bombay universities, who after the undergrad, you know, went to the MBA, got an MBA in the U.S. When I came back after my MBA, there was myself, son of a doctor, I had nothing to come back to, I could not take over my dad's clinic and make it into a big hospital, I wish I had. And there was one large, there was a son from a very large industrial family, he had something to come back to.
Everyone else from our class stayed behind in the U.S. And as you can imagine, like most Indians in the U.S., they've been extremely successful. Now, we all have kids who've grown up, the kids have gotten married, some of them have got kids, but they've certainly moved out of the house. So there are a bunch of people, friends of mine, people I know very, very well, who are in their 60s, like I am, I'm now going to confess my age to be 65.
So people in my age bracket, who have said, you know what, we don't want to sit in this cold, miserable weather in the U.S. or in Europe. And we'd love to spend between Thanksgiving and Easter, which typically is the end of November and Easter being the middle to the end of April. We'd love to spend that time in warmer climates and have our kids come and meet us during their December holidays with the grandkids if they can make it. And that warmer climate for them naturally, because they are of Indian origin, they may have passports that are European or American or Canadian, the natural choice is let's go back home to India.
But coming home to India was fine when the tax rule was you could stay in India for 181 days, 182 days until 2019. And you were not troubled by the tax man. And the government of India in its wisdom from the year on was 2020, came up with another bracket, which you referred to as zero to 120 days, no questions asked.
120 to 180 days, a whole bunch of provisos. If you earn any income in India, which is about 15 lakhs a year, let's say I've got shares in a quantum mutual fund, and I redeem, and I made a capital gain, and that's more than 15 lakhs. I'm now answerable to the government of India for my global sources of income.
Now, that 120 days firstly doesn't straddle the period from Thanksgiving to the month of April, which is Easter. So rather than come to India and deal with the tax man, they've decided to buy homes or go and rent apartments or villas in Spain, Portugal, the Caribbean, Greece, Hawaii, you name it. They're not coming to India, that's the bottom line.
And the government came out with this law, I'm assuming, to prevent misuse of the law, what they call misuse. Misuse, I'm guessing they would classify as someone living in Singapore, Dubai, who can take weekend trips up and down, stay within the 181 days, and not pay tax although they are doing business in India. So I'd probably close that and say, oh, let's come up with a better number.
120 days sounds good. Okay, the person from Singapore and Dubai is probably now not coming to India for those 181 days, now coming to India for 110 days, and spending those other 60, 70 days, which they would have spent in India, in Singapore, in Dubai, wherever else, spending money in that economy. So I don't know what exactly we're trying to do besides hurting economic growth.
And the investment and the multiplier effect of the NRI population coming to live in India would be tremendous. I'll also just give you an example of what's happened between the USA and Canada. So in Canada, which gets even colder than most parts of northern America, the northern USA, people come down to Florida, Texas, Arizona, in the winter, and they are called the snowbirds.
It's actually a phrase for them, snow birds. They kind of migrate when it's too cold, and they come down to warmer weather. So in Fort Lauderdale, where I used to live, and I still have an apartment there on the beach, there are 212 units in my apartment building, and 40 units at least are owned by people from Canada.
Now, they come down to Florida. So in the case of Florida itself, they own roughly 200,000 apartments and homes. And on those homes, they are paying a property tax to the different cities and the states within the state of Florida that they live in.
So my estimate is they're spending $2 billion a year. That's roughly 18,000-19,000 crores just on property taxes to the state governments, to the city governments, who could then use it to build housing, parks, roads for the rest of the community, to use for 365 days in a year. Plus, when they come to live in my building in Fort Lauderdale, they need to cook food, they need to go out, they rent a car, they get their car out.
They're buying things in the United States of America, and they're adding to the GDP of the U.S., and they go back. You know, so I mean, to me, it's like a no-brainer that if the U.S. can have this 181 day for people who are not part of the U.S., of course, President Trump would like to take Canada, different topic, but they are still an independent, sovereign nation, and they probably will be for a long, long time. He's still inviting them to come down to the U.S. and spend money and vacation there and add to economic growth. We should do that to our own brethren, to people who were born in India or of Indian origin.
Govindraj Ethiraj: Right. So there are two different categories here, right? So you talked about the Singapore, Dubai business people who typically have active businesses in India or are connected to active businesses in India.
And the second is categories, you're saying those who are of Indian origin, but living in, let's say, in the United States, it could be other countries too, but come or might want to come and visit India in those periods and for those longer periods, because we have a shorter limit. So therefore, they don't find an incentive to actually come here and prefer to stay back.
Ajit Dayal: I've done some numbers around this, right? And I wrote an article on this too, but there's roughly $4 billion of money that will be invested in India. If you make certain assumptions on how many people of that formula in the U.S. and other parts of the Western world, where it gets too cold. So at least $4 billion of economic injection, if you will. Now in an environment where you're trying to reduce GST rates rationally, and that's good that they're doing it to kickstart the economy and hoping for a 0.3% kickstart to the economy. There were cuts in income taxation at the start of the year, again, hoping for a 0.3%. You've got Trump's tariffs on the other hand, which may impact 1.6% of India's GDP, 1.3% of India's GDP is exposed to the U.S. Then you've got the H1B visa issue. All of this could shave off from the Trump aspect, 0.5 to 0.7% of India's GDP growth rate in the near term. And this alone by itself, my estimates are, could add 0.7% to India's GDP growth the day it starts. You don't have to build any infrastructure.
You have to just change one. You have to change from 120 days, put it back to where it was before 2019, 2020. Move it back to 182 days and you're done.
That's all you have to do.
Govindraj Ethiraj: So anyway, so thematically you're saying that basically non-resident Indians of both these varieties, those who are of Indian extraction and those who are travelling between Dubai and Singapore and similar countries, are more welcome in India and for a longer period. Let them come and stay here and therefore spend and invest.
Ajit Dayal: You have to start wearing a hat which says make non-resident Indians welcome again or that's all you've got to do.
Govindraj Ethiraj: Okay. So the other question is before 1920, we didn't have, I mean, it was still 180 days. I mean, is there anything else that, I mean, you yourself are a non-resident Indian in a manner of speaking.
What else could India do to make NRIs more welcome in not just to sort of visit, but to come and spend time the way you say?
Ajit Dayal: So I think just the number of days is fine. So you're saying that tax treatment itself is sufficient? I think that's enough.
That's all they need. They just need the incentive to come back to their home country. They're looking for a place to park themselves for five, six months in a year without being troubled.
They're looking for a place where they can use as a base to travel to other parts of Asia, right? What you're doing now, you're pushing them to other parts of Europe and making them travel from Europe to Asia or Dubai or wherever else and keeping India kind of like a side trip. That's ridiculous.
I did a further layer of calculation: what if these Indians asked American friends or European friends to come and visit them for Christmas holidays and look at India? You're adding extra injection to the economy. There's nothing you have to do.
We have apartments, they have houses, they'll buy. The free market will take care of all of that. There's really nothing else we have to do.
Govindraj Ethiraj: Yeah, I mean, NRIs are in any case buying 20% of new apartments offered on sale and DLF and so on. So there is enough demand from this segment in any case.
Ajit Dayal: Yeah, there's some demand. They have friends here, they've got family here, they've got guides who will tell them where to live. You know, they've lived in India, not that they've never lived in India.
But most of them have grown up in some part of India. So it's a very, it's like an easy slam dunk. It's frightening why, you know, the government sticks to this 120 day, 180 day and shoots itself not on the foot, but in the head.
It just makes no sense at all.
Govindraj Ethiraj: Right. Ajit, we've run out of time. Thank you so much for joining me.
Ajit Dayal: Thank you for the time. Thank you very much, Govind.
