Foreign companies are increasingly using India’s booming initial public offering (IPO) market to cash out investments and send billions of dollars back to their home countries rather than raise fresh capital for expansion, according to a Reuters analysis.As per the report, only one of the six foreign-based companies that listed their Indian subsidiaries in Mumbai since 2024 raised new funds. The remaining IPOs were structured entirely as Offer for Sale (OFS) issues, allowing existing shareholders to sell their stakes without bringing new capital into the business.Data from Prime Database showed foreign parent companies have pocketed nearly $5 billion through such secondary-offering IPOs.South Korean giants Hyundai Motor and LG Electronics accounted for more than 80 per cent of those proceeds.For every dollar raised in these IPOs collectively, more than $59 flowed out to overseas shareholders.The trend appears set to continue. The planned $1 billion IPO of Walmart-owned PhonePe and Swedish gaming company Modern Times Group’s proposed $335 million listing of its Indian unit are both expected to follow the OFS route.Coca-Cola has also indicated that it will sell part of its stake through the planned listing of its Indian bottling business, while banking sources cited by Reuters said that Carlsberg’s proposed India IPO is also likely to be structured without raising fresh capital.
Valuation premium driving listings
Bankers and legal experts said that high valuations in Indian equity markets are making local listings attractive for global firms seeking liquidity and a valuation boost for parent companies.“India listings provide liquidity as well as a positive impact on the market cap for their parent,” Prashant Gupta, partner at law firm Shardul Amarchand, which advised Hyundai and LG on their IPOs, told Reuters.Indian-listed subsidiaries of foreign companies often trade at significantly higher valuation multiples than their overseas parents.Nestle India, for instance, trades at a price-to-earnings ratio of nearly 77 times compared with around 22 times for its Swiss parent.LG Electronics India trades at nearly 59 times earnings versus 44 times for its South Korean parent.When Hyundai Motor India listed in 2024, the subsidiary was valued at roughly $18 billion, nearly 40 per cent of the parent company’s total market capitalisation.
Concerns over rupee and capital outflows
The growing use of OFS-led IPOs comes amid concerns over pressure on the Indian rupee.The currency has fallen 13 per cent against the US dollar since 2024 and 6 per cent so far this year.Analysts have linked part of the weakness to IPO-related repatriation of funds. MUFG Bank said in January that strong IPO activity had been “one important contributor” to rupee weakness.Foreign portfolio investors have already sold more than $23 billion worth of Indian assets this year, exceeding the previous annual record of $18.9 billion.“IPO-linked capital outflows are exerting a steady, though not abrupt, depreciation bias on the rupee,” Tanay Dalal, senior vice president of business and economics research at Axis Bank, said, as cited by Reuters.
Concerns over IPO purpose
India was the world’s second-largest IPO market in 2025 after the United States, with 367 listings raising $21.8 billion, according to LSEG data.Regulatory data also show that a record $26 billion worth of IPOs are awaiting approval.However, some policymakers have expressed concern that IPOs are increasingly being used as exit routes for investors rather than vehicles for raising growth capital.India’s chief economic advisor V Anantha Nageswaran warned in November that IPOs had “increasingly become exit vehicles for early investors rather than mechanisms for raising long-term capital”.Among recent foreign-company listings, the Indian units of Carraro, Orkla and Tenneco Clean Air were all launched entirely through OFS structures.The only exception was Niva Bupa Health Insurance, whose IPO combined fresh fundraising of $84 million with a larger $146 million OFS component.“The final structure balanced the company’s capital requirements with shareholder objectives, with the fresh capital supporting growth plans and the OFS providing partial liquidity to existing investors,” Niva Bupa said in a statement.