PSU deals expected to boost India's investment banking sector

India's recent market correction has affected fundraising activities for investment banks. Initial public offerings (IPOs) and qualified institutional placements (QIPs) have both slowed down. However, Emkay Investment Banking sees hope in a growing number of public sector deals and government divestments that could boost the sector. Despite the current volatility, the government's initiative to sell stakes in state-owned companies is expected to create business opportunities. The Department of Investment and Public Asset Management (DIPAM) aims to raise Rs 47,000 crore through divestments in fiscal year 2026. This sets a promising stage for investment banks, as public sector undertakings have become key clients. The recent IPOs of companies like Life Insurance Corporation (LIC) and Indian Renewable Energy Development Agency (IREDA) have kept the market active. Many upcoming IPOs, including those of Bharat Coking Coal and CMPDI, along with other funding methods from various state-run banks, are likely to increase deal flow in the coming years. However, the decline in market activity is clear. In 2024, 92 IPOs raised over Rs 1,62,261 crore, yet the numbers in early 2025 dropped sharply. IPOs fell to 10 from 15 compared to the same period last year, and QIPs also saw a significant decrease. Nevertheless, strong support from domestic investors is helping lessen the impact of the downturn. Systematic investment plan (SIP) inflows have remained robust, consistently exceeding Rs 20,000 crore monthly since April 2024. Additionally, domestic institutional investors have invested Rs 5,70,000 crore thus far in FY25, more than compensating for the Rs 2,88,000 crore withdrawn by foreign investors. Emkay noted that positive policy actions from the Reserve Bank of India, like potential cuts in repo rates and measures to enhance liquidity, could strengthen credit growth. These initiatives are expected to improve market conditions in the near future.