Back in the days when China was the world’s largest source of initial public offerings (IPOs) and its economy grew apace, any attempt to draw an analogy between China and India – the world’s two most populated countries – would probably invite many rolling eyeballs.

But the tides have changed. And the changes have come thick and fast.

Not only has India outsized China in terms of population – a milestone that is set to have far-reaching impact on India’s economy – the South Asian nation has also attracted investment from multinationals seeking to diversify away from China, and is starting to steal the limelight from China in the IPO market.

Many factors, from economic to geopolitical, are favouring India over China.

To name a few, “expectations and roadmap that India (currently the fifth largest economy) will bypass Germany and Japan to become the third largest economy in the world by 2027-2030, has investors excited about the region,” said an executive at a mid-market private-equity firm. “The exits for private equity firms via IPO at attractive valuations will further encourage participation in India’s start-up growth story.”

India’s Nifty 50 Index has kept hitting fresh highs for months, as investors subscribe to the notion the country will capture a bigger share in the global supply chain. In contrast, China’s CSI 300 Index is testing its early 2019 lows.

Since the beginning of 2024, India has priced 15 IPOs to raise USD 566m collectively, according to Dealogic data. Last year, 234 Indian companies went public, raising USD 7.89bn in total. In dollar terms, India is at 7% as of 24 January of what it achieved in 2023. Of the 249 companies listed since last year, roughly 18% traded below water as of 24 January.

Meanwhile, 12 Chinese companies have gone public (including also those listed in Hong Kong or elsewhere) so far this year to raise USD 1.15bn, merely 2.2% of the USD 52.09bn in IPO proceeds clocked in last year, when 317 companies were listed.

Out of the 329 Chinese listings completed from 1 January 2023 to 24 January this year, only 127 names (38.6%) traded above the offer price.

Judging by the size of the deal pipeline and the number of deals that have been filed, the gap between the IPO markets of India and China looks set to narrow.

As of 24 January, India had 59 names in the pipeline (including those that are still in early-consideration stage), 159 IPOs filed, 20 withdrawn and 37 that lapsed, per Dealogic ECM data.

Among the filed IPOs are Emcure Pharmaceuticals, an Indian pharmaceutical company backed by Bain Capital, electric two-wheeler manufacturer Ola Electric Mobility Ltd, state-owned telecommunications company Bharti Hexacom.

China, meanwhile, had 322 companies in the pipeline, 71 deals filed, 79 withdrawn and 48 that lapsed. MIXUE Group, a freshly made drinks company, Zeekr, an electric vehicle maker, Mobvoi, a Beijing-based AI company and Midea Group [SHE:000333], a Guangdong-based Chinese electrical appliance company are among the companies that have submitted their IPO prospectus.

Two Chinese equity capital market bankers said IPO withdrawals have increased since last year, in the wake of the new listing regulations that essentially tighten listing reviews.

According to easy-board.cn, in 2023, China had 286 IPO withdrawals, over 9x 2022’s 31, and almost 10x 2021’s 29.

Recent heavier droves of China A-share listing withdrawals have been driven by poorer-than-expected performance of the listing candidates in 2022 and freefalling share prices at home, the two bankers said.

China’s plan to shore up its stocks’ performance and a reserve requirement ratio cut by the People’s Bank of China announced 24 January to rev up the economy helped lift share prices on the day. But until economic activity improves, such rallies are likely to be short-lived.

It’s also worth noting that it took an average of 335 days from filing to pricing for Chinese IPOs in 2023, when the country’s stock market regulators rewrote many of the listing guidelines. The process was 4x the average of 84 days in India, Dealogic data show.

To be fair, India’s economy and equity markets are growing just probably as rapidly as China’s did decades ago. As China seeks to move up along the global supply chain, India takes over a lot of labour-intensive jobs to improve wages, as well as some technology goods orders thanks to continued tension between China and the US.

Still, China had many reasons to be proud of its economic clout, manufacturing capability and capacity, and its generations of globally influential technology/Internet enterprises, from Alibaba, Tencent and JD.com to BYD, and so on, many of which are listed in the US.

It took China decades to achieve many of its accomplishments. Despite India Corp’s near-term wins, which is arguably attributable to recent years of tense China-US ties, it still has a long way to go to prove itself.

A partner at a top-tier Indian legal firm has also warned that, “Indian stock markets are one of the most expensive in the world, with expectation of a correction if or when (foreign institutional investors) pull out, as soon as they see an opportunity to invest in US where the fears of a recession have receded.”

In the words of Warren Buffet, “Only when the tide goes out do you discover who’s been swimming naked.”