BENGALURU (BLOOMBERG) – The market for initial public offerings (IPOs) in India is turning into a feeding frenzy.

The amount of money raised in IPOs this year has reached US$8.8 billion (S$12 billion), already surpassing the totals of the past three years though it is only August. At the current pace, this year would exceed the all-time record of US$11.8 billion. Founders, bankers, lawyers and advisers are racing to cash in on fervent demand for fresh public offerings.

The catalyst, in a word, is Zomato. The food-delivery start-up went public last month and, despite deep losses and mediocre prospects for profitability, shares have soared more than 70 per cent. That has fueled the idea that similarly profit-challenged start-ups could find a strong reception from investors.

Oyo Hotels & Homes, a long-troubled lodging giant, started work last week on its draft prospectus and aims to file in October, according to people familiar with the matter. The ride-hailing leader Ola and fintech start-up Pine Labs have also begun talks with investment bankers, according to other people aware of the situation.

“India is definitely the star of the show – that is the new phenomenon,” said Mr Udhay Furtado, co-head of Asia equity capital markets at Citigroup, the lead foreign bank in Asia IPO league tables so far this year. “Zomato really opened people’s eyes to India and now we have all these privately funded unicorns coming to the public market.”

The performance of recent IPOs, such as Zomato, has fed the enthusiasm. Newly-listed Indian stocks are beating the benchmark Nifty 50 Index by more than 40 percentage points this year, the biggest gap in seven years.

The country’s three most valuable start-ups are all considering or planning IPOs. Paytm, the country’s leader in digital payments, filed its preliminary offering documents, aiming to raise as much as 166 billion rupees (S$3.04 billion). If it reaches that level, the IPO would be the country’s largest debut ever, eclipsing the more than 150 billion rupees raised by state-owned Coal India.

Flipkart, the Indian e-commerce giant controlled by Walmart, is aiming for an IPO as soon as the fourth quarter, Bloomberg News has reported. Byju’s, a digital education start-up valued at US$16.5 billion, is in early discussions about an IPO and bankers are encouraging the company to take advantage of the red-hot market, according to sources familiar with the matter. Byju’s is in the midst of absorbing several substantial acquisitions and is likely to hold off on any listing for at least a year.

Such is the hysteria that PhonePe, a payments start-up Walmart acquired as part of its Flipkart deal, is considering shifting its incorporation back to India from Singapore to capture local investor attention, according to two people familiar with the matter who did not want to be identified. The regulatory upheaval in China has also sent investors looking for promising opportunities in countries with more predictable government policies.

“If global investors have to pick an emerging market, the balance is tilting in India’s favour after the regulatory action in the China Internet ecosystem,” said Mr Pankaj Naik, executive director and co-head, digital & technology, at consultancy Avendus Capital. “India may not be as attractive as China in the broader economic sense but it’s looking like a safer bet.”

India’s success with start-ups has long lagged beyond that of the United States or China. But this year has been something of a breakout. With the Covid-19 pandemic, many consumers have turned to online services for grocery deliveries and other e-commerce, along with maths tutoring and medical diagnoses. Revenue has surged.

Global investors like Fidelity Investments, KKR & Co and Singapore’s Temasek have pumped money into India, while China’s crackdown on private enterprise has spooked financiers. The value of venture investments in India reached US$7.9 billion last month, surpassing China for the first time on a monthly basis since 2013, according to researcher Preqin.

That kind of financing has helped India build a substantial blessing of unicorns, start-ups worth US$1 billion or more. There are more than 35 such companies, led by Byju’s, Paytm and Oyo, according to CB Insights, suggesting dozens more could go public in the years ahead. Whereas the biggest IPOs of the past were conglomerate or state-backed companies like Coal India, start-ups are now leading the surge.

“Many of India’s technology unicorns have huge growth opportunities ahead of them,” said Mr Devarajan Nambakam, a managing director at Goldman Sachs Group in Mumbai. “Everything is relative and given the vast opportunity, India’s macro fundamentals, political stability and overall investment policies make it one of the better destinations for global investors.”

Investment banks such as Goldman, Morgan Stanley, JPMorgan Chase & Co and Citigroup are at the forefront of multiple discussions, the sources said.

Mumbai-headquartered Kotak Mahindra Bank’s investment banking team is also part of several of IPO conversations, they said.

Oyo, a SoftBank Group-backed start-up with a history of troubles, is one of the more surprising IPO candidates. The hotel-booking company, run by 27-year-old Ritesh Agarwal, botched a global expansion with overly aggressive targets and then was hammered by the Covid-19 pandemic. Last year, it cut its workforce, furloughed thousands and slashed compensation and marketing as it retreated.

But the brutal overhaul allowed Oyo to survive as people stopped travelling and now bookings are recovering in Europe, the US and parts of Asia. Mr Agarwal, in an interview with Bloomberg TV, said the coronavirus pandemic hit Oyo like “a cyclone” with business falling 66 per cent in 30 days.

But the company made difficult changes to focus on the technology and services most valuable to its hotel partners. The start-up recently secured a US$660 million debt financing from global investors to service its existing loans.

Work began this week on Oyo’s draft prospectus with the goal of filing with regulators within the next 10 weeks, said a source familiar with the developments. Two banks, Kotak and JPMorgan, have already been selected and Citi is close to being added to a line-up that is likely to grow. The timing, size and blend of primary and secondary shares have yet to be decided, multiple people said.

If Mr Agarwal does test the public markets, he will have plenty of company. Beauty retailer Nykaa filed its initial offering documents this month for a share later this year. API Holdings, the owner of the country’s largest online pharmacy PharmEasy, is targeting an IPO of more than US$1 billion with plans to file initial documents by mid-October, according to sources. Pine Labs, a fintech start-up that operates in India and parts of South-east Asia, is being courted by bankers who claim it could reach a US$10 billion valuation, according to a person with knowledge of the discussions. It was last valued at US$3 billion, according to CB Insights.

“Indian public market investors have shown that they do indeed value the role of disruption and growth,” said Ms Vani Kola, founder and managing director of the venture firm Kalaari Capital. “We will see hundreds of such IPOs over the next decade.”