Foreign Companies Leverage Indian IPOs for Stake Sales Amid Currency Strain

Overview of the Current IPO Landscape in India

The Indian IPO market is witnessing a significant influx of international firms, yet a notable trend has emerged: many of these foreign entities are opting for Indian listings primarily to liquidate existing investments rather than to secure new funding for expansion. A report from a news agency, referencing data from Prime Database, indicates that out of six foreign companies that launched their Indian operations on the Mumbai stock exchange since 2024, only one managed to raise new capital. The rest utilized offer-for-sale (OFS) mechanisms, enabling current shareholders to divest their stakes without bringing in additional funds.

This trend is underscored by substantial figures, with foreign parent companies collectively garnering nearly $5 billion from these IPO-related stake sales. Notably, automotive leader Hyundai Motor and consumer electronics giant LG Electronics accounted for over 80% of the total proceeds. The disparity between capital inflows and outflows is stark; for every dollar raised through these public offerings, more than $59 was sent back to overseas shareholders instead of being reinvested in India.

Future Listings and Market Dynamics

There are no signs of this trend abating, as upcoming listings from Walmart's PhonePe and Modern Times Group's Indian gaming subsidiary are also expected to follow the OFS structure. Additionally, Coca-Cola has announced plans to divest part of its stake in its Indian bottling operations through a future IPO. Banking sources have indicated that Carlsberg's anticipated IPO in India is unlikely to involve any new capital raising.

Prashant Gupta, a partner at a law firm, noted that these listings provide liquidity and positively influence the market capitalization of the parent companies. Carlsberg is reportedly exploring various strategies to enhance shareholder value, which may include an IPO in India.

Impact on the Indian Rupee

The increasing trend of utilizing IPOs as exit strategies coincides with ongoing pressure on the Indian rupee. Since 2024, the currency has depreciated by 13% against the US dollar, with an additional 6% decline this year. Analysts caution that the large-scale repatriation of IPO proceeds could be exacerbating the strain caused by foreign investor withdrawals. Earlier this year, a major bank highlighted that the robust IPO market in India has been a significant factor contributing to the rupee's weakness.

Foreign portfolio investors have divested over $23 billion in Indian assets this year, surpassing the previous record of $18.9 billion in 2025. According to a senior vice president at a financial institution, the capital movements related to IPOs are creating a gradual depreciation pressure on the rupee.

Regulatory Perspectives and Market Valuations

Despite these challenges, regulatory bodies have not indicated any intention to discourage listings heavily reliant on OFS. However, India's Chief Economic Advisor has previously warned that IPOs are increasingly being used as exit routes for early investors rather than as a means to raise long-term capital, which he believes undermines the essence of public markets.

At the core of this trend is the attractive valuation of Indian stocks. India has emerged as the second-largest IPO market globally in 2025, following the United States, with 367 listings raising $21.8 billion. Regulatory filings reveal that approximately $26 billion worth of IPOs are currently pending approval. Foreign companies are drawn to the valuation disparities between Indian subsidiaries and their global counterparts, often finding that Indian-listed entities command significantly higher earnings multiples.

Examples of Recent IPOs and Future Outlook

For instance, Nestle India trades at nearly 77 times earnings, compared to about 22 times for its Swiss parent. Similarly, LG Electronics India has a valuation multiple of nearly 59 times, while its South Korean parent stands at 44 times. Hyundai's Indian subsidiary exemplifies this trend, debuting on the stock market in 2024 with a valuation of around $18 billion, nearly 40% of Hyundai Motor's total market capitalization.

Investment experts suggest that this trend is driven by strategic capital allocation, with asset owners taking advantage of cross-market valuation discrepancies. Several other foreign-owned Indian firms, including Carraro, Orkla, and Tenneco Clean Air, have also opted for the OFS route in recent years. Among the recent foreign-backed IPOs, only Niva Bupa Health Insurance combined a fresh capital raise with an OFS component, successfully raising $84 million in new funds while facilitating a larger $146 million share sale by existing investors.