India’s surging stock market is fuelling a rush of initial public offerings, but some investors are becoming worried about the poor performance of many of Mumbai’s listings.

Investors and analysts said the upbeat outlook for India’s economic growth, improved corporate earnings and strong demand from foreign investors are providing a tailwind for deals, with Dealogic data showing 21 IPOs raised about $678mn in January, compared with $17mn a year ago.

More listings are expected: a total of 66 companies have filed listing documents with Indian regulators, according to brokerage IIFL.

But analysts warn that a 20 per cent rise in India’s benchmark Sensex stock index over the past 12 months has pushed valuations for the country’s equities to historically elevated levels.

“In the near term, strong IPO flows look set to continue in India,” said Kunal Vora, head of India equity research at BNP Paribas, pointing to strong fundamentals and growth estimates for the coming year. “The only concern that remains is that of valuation.”

The slate of anticipated deals includes Ola Electric — expected to be among the largest Indian IPOs of the past two years — as well as fintech group MobiKwik.

India’s IPO market picked up last year as stocks, which had made little progress since late 2021, rallied on the back of strong corporate earnings and growing enthusiasm from both domestic and international investors. Many of the foreign investors were hunting for attractive growth opportunities after fleeing China’s tumbling markets.

That renewed enthusiasm helped push the total market capitalisation of stocks listed in India to roughly $4tn, overtaking Hong Kong to become the world’s seventh-largest market. Last year, Indian IPOs raised almost $8bn.

“The potential for Indian companies to go public and raise capital is huge and still under-tapped,” said Nirmal Jain, IIFL’s founder. While “the older generation [of company founders] was very conservative and wanted to keep information private . . . a new generation has come”.

India has become one of the fastest-growing economies in the world, with an expansion of 7 per cent expected this year.

It has been a leading beneficiary of unease over China’s economy and geopolitical tensions with the west, with foreign investors pouring more than $20bn into Indian stocks compared with $8bn into Chinese equities in 2023, according to Société Générale.

The country’s large listed companies have benefited from Prime Minister Narendra Modi’s emphasis on infrastructure and digitisation, with the government on Thursday announcing an increase in public spending in a budget ahead of elections this year.

The digitisation drive has helped attract millions of new retail investors to India, with the total number of trading accounts in the country rising to a record of nearly 140mn by the end of 2023.

SocGen’s analysts warned, however, that with Indian equities far more richly valued than their Chinese counterparts, the “relative strength argument is somewhat weakening”.

An analysis of returns on debut share sales in Mumbai during recent years also highlights the poor performance of many Indian IPOs, which could mean that domestic and global investors eventually lose their appetite for such listings.

Demand for IPO shares in companies that have listed in India since the start of 2021 has outstripped available supply by 44 times on average, with those stocks going on to jump about a quarter on the first day of trading, according to a recent report by investment firm YK2 Partners.

But two-thirds of those listings went on to lag behind the broader market, according to the firm, which said Indian IPOs “might make sense for investors looking for an IPO pop but not for long-term investors”.

Among the most prominent examples is Paytm — one of the first of a generation of technology start-ups to go public in 2021, which is now trading at Rs609 a share, about 70 per cent below its IPO price.

Paytm’s shares fell sharply on Thursday after the Reserve Bank of India ordered its payments bank to stop taking deposits and offering banking services, cutting off a vital growth area for the fintech group. The RBI cited “persistent non-compliances and . . . supervisory concerns”. The company has said it is complying with the order.

Concerns about IPO performance have prompted some institutional investors in India to question the wisdom of participating in new listings. Raamdeo Agrawal, chair of Indian financial group Motilal Oswal, said his mutual funds would largely eschew IPOs this year, preferring capital raises from companies already trading on public markets due to the greater transparency around their finances.

“IPOs, for serious buying, are avoidable,” he said. “People apply into an IPO and hope for a big pop . . . We’re in the game of investing, we’re not in the game of speculating.”

The author is general partner at Andreessen Horowitz and author of ‘Read Write Own’

The early internet was a magical place because it was driven by people and their creativity. Builders knew that whatever they made, they owned — a simple promise that established the right incentives for the technology to flourish. But now, the internet is stagnating and it’s harder than ever for new apps to break through.

Consider the app stores: almost all the products that consistently appear on leader lists were founded more than a decade ago: Facebook (2004), YouTube (2005), Twitter, now known as X (2006), WhatsApp (2009), Uber (2009), Instagram (2010), Snap (2011) and even Tiktok’s parent ByteDance (2012).

Big Tech consolidated its control of the internet around 2010. Just a few gatekeepers now determine who or what will succeed online. Restoring a vibrant internet means breaking this power and putting users back in the driver’s seat. The key to doing that is creating new networks that cannot be easily usurped — ideally, those built on blockchains.

Early internet networks, like the web and email, provided a stable foundation upon which people could build businesses and establish a direct connection to their audience. This is no longer the case: networks controlled by the largest tech companies now reach billions, but entrepreneurs and creators have learned just how untrustworthy they can be. These businesses clamp down on application programming interfaces, meddle with mysterious algorithms, and rank content according to opaque and capricious policies. Worse, big tech companies claim most of the revenue that flows through their networks. This stifles creativity, making our online lives poorer.

This is the economics of network effects: companies provide perks and easy-to-use tools to draw in users — and then, once they are locked in, switch to extracting value from them. A corporate network that doesn’t make this switch will be outcompeted by one that does. It’s impossible to quantify how much innovation and consumer choice has been lost as a result.

Some clamour for regulation — though this risks cementing existing power structures. Others focus on reviving early internet protocols, such as plans for so-called federated networks (in which policies are enforced by a central framework), though these are not widely used.

A revitalised internet would require three properties. First, openness: being available to anyone, anywhere. Second, trust: the rules should be transparent, fair and dependable, so builders, creators and users know the network cannot yank the rug out from under them. Finally, all users — not just centralised gatekeepers — should have a say in the networks they contribute to.

Networks built on blockchains have all these attributes. While it’s easy to dismiss the technology because of its associations with casino-style gambling behaviour — notably FTX and meme coins — it would be a mistake to ignore its potential. Progress towards greater scalability indicates this could be as transformative as the arrival of the PC.

Blockchains are a new class of virtual computer that can, for the first time ever, establish inviolable rules in software. Usually, whoever controls computer hardware can tell the software what to do. But blockchains invert this relationship, preventing those who control a centralised server from arbitrarily changing rules. Unlike traditional computers, blockchains can ensure that any code they run will continue to operate as designed. This could potentially revolutionise the internet’s power dynamics.

Networks built on blockchains combine the societal benefits of early internet protocol networks (open access, democratic governance, low take rates and user ownership rights) with the competitive advantages of corporate ones (sustainable sources of funding and advanced features). This provides the path to a freer and more vibrant internet that will reward us all.

Shell raised its dividend and announced another round of share buybacks as it reported annual profits for 2023 of more than $28bn.

Europe’s largest oil and gas company said on Thursday that adjusted earnings were $28.3bn, down about a third from the record set in 2022 but higher than any other year since 2011.

Shell’s $54.2bn in cash flow from operations was the second highest in the company’s history.

“Shell delivered another quarter of strong performance,” said chief executive Wael Sawan, adding that the company had made “good progress” against the targets he outlined in the middle of last year.

Adjusted earnings of $7.3bn in the final three months of 2023 beat average analyst estimates of $6.04bn, thanks in part to a strong performance from its liquefied natural gas business.

Since taking over as chief executive in January last year, Sawan has sought to improve financial performance by simplifying Shell’s approach to the energy transition. That process has involved streamlining the senior management team, re-emphasising the oil and gas business and trimming less profitable parts of the company’s low-carbon portfolio.

Shell has also promised to trim costs, pledging to reduce capital spending in the next two years to $22bn-$25bn a year, down from a planned $23bn-$27bn in 2023, and cut group-wide operating costs by $2bn-$3bn by the end of 2025.

Capital expenditure last year was $24.4bn and operating costs had already been reduced by $1bn, Sawan said, adding that spending would be controlled, in the short term, by being more selective about which parts of the energy system Shell invests in.

Last year, Shell spent $5.6bn on low-carbon energy projects, representing 23 per cent of total capital expenditure, Sawan said, highlighting its $2bn purchase of Danish biogas producer Nature Energy. However, he also emphasised the company’s continued investment in fossil fuel projects, which will add at least 200,000 barrels of oil equivalent a day to Shell’s production capacity.

Shell, like most of its rivals, has used bumper profits from the past two years to embark on a huge share repurchasing scheme.

In 2023 it distributed $23bn to shareholders, representing more than 42 per cent of cash flow from operations.

On Thursday it announced a further $3.5bn of share buybacks and increased its dividend by 4 per cent to $0.34 a share. It still remains below the $0.47 a share paid each quarter from 2014 to 2019.

The biggest contributor to group profits was once again the integrated gas division, which reported quarterly earnings of $4bn. Shell’s oil division also performed well, generating profits of $3bn underpinned by higher production than the previous quarter, but its refining operations suffered.

In a worrying sign for the global economy, Shell’s chemicals and products division, which produces refined fuels, reported adjusted earnings of just $83mn because of lower refining margins, lower demand and planned maintenance.

Shell’s shares rose by just under 1 per cent in early trading.

The US Treasury will hold some of its largest-ever debt auctions in the coming three months in an effort to fill the yawning federal budget deficit.

The Treasury said on Wednesday it would increase the size of auctions at most maturities for the next three months, with two-year and five-year auctions hitting record sizes. The five-year auction in April, for $70bn, would be the biggest ever for debt with a maturity of two years or more.

The US has been increasing its borrowing over the past few quarters, as the gap between government spending and tax revenue has grown. The federal deficit stood at $1.7tn last year.

However, the Treasury added that it expected this to be the last increase in auctions of so-called coupons — as longer term bonds are known — for a while. Treasury bills, which have a maturity of less than two years, do not offer regular coupon payments.

“Based on current projected borrowing needs, Treasury does not anticipate needing to make any further increases in nominal coupon or FRN [floating rate note] auction sizes, beyond those being announced today, for at least the next several quarters,” it said.

To meet its borrowing needs, the auction sizes of the two- and five-year notes will increase by $3bn a month, the same pace of increase as last quarter. After a bigger initial jump in February, the 10- and 30-year auctions will grow by $2bn and $1bn respectively.

In its quarterly refunding auctions next week, the Treasury department will sell $121bn worth of debt, roughly in line with the expectations of primary dealers.

Treasuries rose sharply in mid-morning trading in New York, with the two-year yield down 0.15 percentage points to 4.21 per cent. However traders attributed the moves to a lower than expected jobs number compiled by payroll processor ADP and jitters ahead of the Federal Reserve meeting later in the day.

Mike Riddell, a bond fund portfolio manager at Allianz Global Investors, said “supply dynamics are set to increasingly appear on investors’ radar in the lead up to the US election, not least because of the deficit increase on the back of [presidential hopeful Donald] Trump’s plans to take the corporate tax rate from 21 per cent to 15 per cent”.

However, investors are likely to welcome news that the Treasury does not expect to increase issuance again after this quarter, having faced three consecutive quarters of issuance increases.

“The good news is the projection that issuance has broadly peaked . . . The issuance story is still scary, but no more increases is a silver lining,” said Padhraic Garvey, head of research, Americas at ING.

The announcement comes just hours before the Fed’s policy meeting announcement, in which it is widely expected to keep interest rates at current levels.

Officials may address the bank’s quantitative tightening programme on Wednesday, after minutes from their last meeting showed some members had begun to discuss the possibility of an end to the policy.

The Fed is at present shrinking the size of its balance sheet, but could slow or end that process if market liquidity problems develop. The end of QT — alongside a halt to auction size increases — would alleviate some pressure on Treasury market investors to continue absorbing such high levels of debt.

The writer is professor of economics at the London School of Economics and Political Science

Britain is stuck in a rut of stagnating productivity and economic growth. This is harming living standards and competitiveness. It is mainly due to a lack of investment.

The UK languishes at the bottom of the G7 league table for investment. Over the past 30 years, Britain’s gross fixed capital formation has averaged 18 per cent of GDP, 4.7 percentage points less than the average for the rest of the G7 over this period, and relatively low in both the public and private sectors.

Unfortunately, the current government seems to be intent on maintaining this path of low investment, low productivity and low growth. Public sector net investment will decline from 2.6 per cent of GDP in 2023-24 to 1.8 per cent in 2028-29, according to the analysis of the chancellor’s Autumn Statement by the Office for Budget Responsibility.

So the UK needs a strategy for reviving the economy through increased public and private investment. A programme of investment in the activities and technologies of the 21st century to tackle climate change, biodiversity loss and environmental degradation, including air and water pollution, would deliver a strong boost to both productivity and economic growth.

Analysis done with colleagues from the London School of Economics and the University of Cambridge found that an increase in annual public investment equivalent to 1 per cent of GDP, or £26bn at current prices, and a rise of 2 per cent in private investment, would put the UK on to a much more productive, dynamic and attractive path to growth.

A large part of this should be focused on speeding up the move away from fossil fuels, the reliance on which, as the cost of living crisis has revealed, creates insecurity and a drag on the economy.

The OBR calculated that the energy price cap and other measures introduced by the government to protect consumers from the rocketing price of natural gas resulted in a total subsidy of £78bn over the past two years.

It would have been far better if the UK had invested that money in more measures to promote energy efficiency and to reduce our exposure to the volatility of fossil fuel prices. Cutting our consumption of fossil fuels will bring significant savings to our economy, and improved energy efficiency will increase productivity.

Most private investors can see this logic and the potential opportunities, but their confidence has been undermined by recent shifts in government policy and the weakening of targets. The government has a misguided obsession with further unsustainable development of oil and gas fields in the North Sea, where operating costs remain relatively high compared with other hydrocarbon basins.

North Sea oil and gas is only really profitable if consumers in the UK and the rest of Europe continue to pay high prices for energy. But those prices will come down as the costs of renewables and electricity storage continue to fall.

The COP28 climate change summit in Dubai in December reached a decision, rightly supported by the UK, to speed up the transition away from fossil fuels. This will inevitably mean a drop in demand for oil, coal and gas, and a fall in international market prices. North Sea investments will quickly turn into stranded assets.

Whoever wins the next election should be focusing instead on ways of increasing investment in more sustainable areas of the economy, such as an agricultural system that promotes robust ecosystems and food security, cleaner air in our cities, and uncontaminated water in our rivers and along our beaches. Waste and pollution create significant additional costs and undermine the UK’s productivity.

While there are, of course, important fiscal constraints, and government consumption must be fully and securely financed, borrowing for strong and productive investment is fiscally responsible. It enhances productivity, creates growth and revenue, and generates additional private investment. It is much better for sustained growth than, for instance, cutting taxes to encourage more consumption, which would boost growth only in the short term.

The transition to a sustainable, inclusive and resilient economy is a genuine opportunity for the UK to drive innovation and competitiveness and rekindle productivity growth.

But it requires government to embrace a coherent, credible and targeted set of policies to unlock new, intelligent and sustainable forms of investment and growth.

Saudi Aramco has dropped a plan to boost its daily production capacity, in a big policy reversal by the world’s largest oil company.

The state-run oil producer said on Tuesday that it had been asked by the energy ministry to abandon a plan to increase the kingdom’s maximum sustainable production capacity from 12mn barrels a day to 13mn b/d by 2027.

The multibillion-dollar investment programme had set the company apart from much of the industry where spending on oil production is generally falling owing to concerns about climate targets and the strength of future demand. Saudi Aramco accounts for about 10 per cent of the world’s oil supply.

The decision was taken by the ministry of energy and was not driven by any technical or operational issue at the company, which remains in a position to restart the investment programme if requested, according to a person familiar with the matter.

Saudi Aramco is currently producing about 9mn b/d, following the kingdom’s decision to cut production as part of Opec’s efforts to support prices. That means the company already has 3mn b/d of spare capacity that it could bring online to meet any sudden spike in demand, reducing the immediate need to increase its maximum output further, the person said.

Saudi Arabia expects to free up a further 1mn b/d of oil for export by displacing liquid fuels used in the kingdom for power generation with gas, the person added.