Moneycontrol Pro Panorama | India’s IPO market frenzy

IPO

With its blockbuster initial public offer (IPO) of INR 12,500 crore that was subscribed nearly 17 times, HDB Financial Services shares climbed higher in Thursday trades, after a listing pop of 13 per cent yesterday. Another relatively smaller INR 540 crore IPO from Sambhv Steel Tubes similarly was oversubscribed by nearly 28 times and listed at a premium of 34 per cent to its issue price.

Such oversubscription to large and small IPOs portrays the Indian investor’s appetite for primary market offerings. A two-month lull early this year, perhaps due to the US tariffs weighing on the sentiment in global financial markets, has been more than offset by a record number of filings and listings seen in recent months. In this article, my colleague Shishir Asthana writes that the number of Draft Red Herring Prospectuses (DRHPs) filed has more than doubled—118 companies submitted their papers this year compared to just 52 in the same period last year, with expectations set at a staggering Rs 1.6 lakh crore in potential funds, up from Rs 1 lakh crore in 2024.

It’s not just IPOs but Indian markets are also seeing a surge in mergers and acquisitions (M&A) activity with deals worth USD 45.4 billion registered in the first six months of 2025- higher than the previous year period by 3.3 percent.

An interesting feature of India’s primary market is the surge in small and medium enterprises (SME) IPOs. Of the 62 that tapped investor funds in the first three months of 2025, 52 were from SMEs. And, here’s some more mind-boggling data from Prime Database, India’s leading provider of primary capital market data. From 400 retail applications per IPO recorded in CY2020, the number has surged to 1.9 lakh applications in 2024!

Such frenzied activity seems to be trending in other regions too. US primary markets that saw a lull for some time seem to be warming up. An EY report cites that the Q1 2025 IPO market experienced a 55% increase in the number of deals compared with Q1 2024, with 59 IPOs raising USD8.9 billion.

Also, new listing volumes on the Hong Kong Stock Exchange jumped around eight times to $14 billion in the first half of this year, from just $1.8 billion in the same period in 2024, states a CNBC news report.

The moot question is: are IPOs a win-win for all stakeholders, promoters and investors? Ravindra Sonavane of Moneycontrol analyses that the average listing day gain this fiscal year stands at just around 9 percent, a sharp decline from 30 percent in FY2025 and 29 percent in FY2024. In a sense, the post-listing returns are underwhelming, though there are some exceptions that have delivered good returns!

Of course, for the promoter who seeks to access capital for business expansion, the liquidity in retail markets offers an opportune moment. With bank credit scarce and expensive for this segment of industry, a vibrant capital market brings easy capital while also offering a lucrative exit for promoters.

Sure, the Securities and Exchanges Board of India is trying its best to make IPO rules more stringent. But the SMEs only need permission of the relevant stock exchanges.

After all, a savvy retail investor must know that equity investing is fraught with risks that can even erode capital!

Are we rallying, or overcorrecting? (republished from the FT)

Technical Picks: KRBL, Can Fin Homes, JK Cements, Bharat Forge.