What Is India’s IPO Boom Telling Us?

With 300 listings and counting, India is among the world’s busiest markets for initial public offerings, after the US, Hong Kong and mainland China. It is estimated to reach $20 billion by the end of 2025, eclipsing previous peaks. Although this surge is boosted by a flurry of mega issues, companies across new-age tech, e-commerce, retail, infrastructure and healthcare are also tapping the primary market with high-quality IPOs. For these issuers, several propitious factors are coming together. 

The market is recovering from the selloff in the early months of the year driven by global trade tensions, pull-outs by foreign investors seeking safety of a strengthening dollar and better returns in mature markets, and flagging urban consumption. Price-earnings multiples are above long-term averages, but most investors are adjusting for the ebullient retail participation, especially from households, which is producing sizeable oversubscriptions. The share of capital market instruments in households’ financial savings has risen from 1.6% in 2014-15 to 15.1% in 2024-25, according to the RBI. Broader adoption of digital payment methods like UPI for IPO applications has also democratised participation, particularly in the hinterland. Market infrastructure improvements such as shortened listing timelines, streamlined processes, and the rationalisation and clarity of regulations by the SEBI as well as the RBI’s easing of norms for banks funding IPOs and mergers and acquisitions, have created a conducive environment. Domestic mutual funds and institutional investors have been a key catalyst in expanding retail investor understanding and interest by providing both intellectual and financial capital. 

Market Signals
Is the phenomenon the first flicker of a rejuvenation in private investment that has been languishing for so long that ‘animal spirits’ has become a pejorative term? Several developments suggest that this could be the case.

First, the biggest listings have come from power and utility companies as they cash in on India’s emergence as a global leader in renewables investment. New investment in infrastructure overheads usually scent a welling tide of downstream capacity creation in response to a pick-up in aggregate demand gaining traction. Some IPOs are also being used for debt repayment, which is also a positive signal towards balance sheet repair.

Second, a big clutch of IPOs is seeking growth financing, including start-ups, electric vehicles, and quick-commerce. Overvaluation is a risk, but leverage appears to be contained in these single issues.

Third, about two-thirds of IPOs are private equity, venture capital, promoters and foreign manufacturing MNCs converting portfolio interest into public debuts through offers for sale rather than fresh issues. This is a sign of a maturing investment destination that supports these exits so that they are incentivised by profit booking and collecting ‘MNC premium’ to invest in the next generation of startups. As The Economist points out, a robust IPO market gives investors the confidence to bet on early-stage tech companies that may take over a decade to pay off.

Fourth, foreign portfolio investors who have been sellers since July 2025 turned buyers in October. Talk of an imminent India-US trade agreement has lifted portfolio investment sentiment.

Undoubtedly, the IPO exuberance also warrants caution and selectivity, given the relatively lacklustre returns delivered by the broader market indices this year. The SME index has yielded negative returns. Consequently, investors may be eyeing debuting companies as a better place to make returns. Moreover, at least half of the IPOs are trading below their listing price, perhaps indicative of mispricing or of a maturing market cycle. Furthermore, the majority of listers are smaller firms that tend to be volatile. The distinct lack of participation of FPIs in the IPO market strikes a discordant note, although it could just be a case of wait-and-watch relating to tariffs and the trade deal. 

On the other hand, domestic investors are euphoric. Is it a case of getting carried away or is their innate belief in India’s fundamentals finally showing signs of paying forward? The boom indicates both strong investor confidence and a healthy financial market. Such booms, therefore, are often correlated with periods of economic strength, fueled by factors such as robust domestic consumption and infrastructure investments. The 2025 upsurge is also associated with expansion in key sectors such as technology, renewables, and consumer goods, imparting diversification, an evolving economic landscape and new options to the market.

IPOs are also helping raise fresh capital, be it for expansion, business development, and/or debt reduction. This directly fuels corporate growth and investment. Another healthy aspect is the shift to domestic investment. Greater reliance on domestic capital rather than foreign funds promotes a strong, local investor base that can provide stability to the market while strengthening the startup environment and signalling market maturity that creates a fertile environment for future new offerings.

On the downside, investors need to be wary of the risk of overvaluation and poor long-term returns for those who buy into the hype. Moreover, IPOs can be more volatile than established stocks, especially right after they list. Negative news or a change in market sentiment can cause significant price corrections, especially if the IPO boom is fuelled by irrational exuberance, which can stoke a potential market bubble. Vivid examples are the dot-com bubble of the late 1990s, which led to major corrections and investor losses.

Government interventions have often been made in the Chinese IPO market, including pausing listings, to curb excessive speculation and misalignments. In India too, the 2008 boom showed how initial euphoria could lead to huge post-listing losses.

For now, with abundant liquidity and sustained retail interest, the IPO pipeline looks set to extend into 2026.