Moneycontrol Pro Panorama | IPO Paradox: Fundraising soars, returns shrink

The year 2025 is set to close with trailblazing initial public offerings (IPOs), surpassing all past records.

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India’s primary market is on fire. The year 2025 is set to close with trailblazing initial public offerings (IPOs), surpassing all past records.

With market sources indicating IPOs of 28-30 firms hitting primary markets in December and raising about Rs 48,000 crore, 2025 will be the biggest year in terms of number and value. Until November, 93 mainboard listings have mopped up around Rs 1.54 lakh crore. December issues will boost the value to about Rs 2 lakh crore, higher than Rs 1.59 lakh crore last year and Rs 49,436 crore in 2023.

Check the profile of these companies – These include big and mid-sized companies from across a gamut of sectors such as fintech, renewables, healthcare, and consumer all in a rush to cash in on the vibrant investor mood.

To be sure, there is a liquidity surge that some market veterans believe is shifting from the secondary market to the realm of IPOs. And this trend is seen among institutional investors, portfolio managers and retail investors beyond the active tier 1 cities.

Meanwhile, note that within the IPO issues, these are more often than not offers-for-sale of the existing promoters/private equity/venture capital stakeholders. The question to ask: Would these exit if the return prospects are encouraging?

While the pipeline of new issues that could come up is showing no signs of fatigue, the returns are -- and this is what retail investors must be wary of.

Data sourced from Prime Database show that the average gains of IPO stocks on listing soared from about 11 percent in 2022 to 29 and 30 percent in 2023 and 2024, respectively. But wait, 2025 listing gains (until November) are a low 9 per cent. Furthermore, only a handful of the 91 IPOs turned multi-baggers and delivered over 50 percent returns, with most falling into negative terrain in 3-6 months.

The market regulator Securities and Exchange Board of India recently revised rules for anchor investors, promoter stock options and disclosures. The need of the hour is increased scrutiny of documentation, board members, accounting procedures and promoter businesses in order to ensure ethical and transparent standards.

The onus is also on the investors to safeguard personal interest instead of getting sucked into the herd. The writing is clear on the wall. Fundraising is skyrocketing, but are returns too? The BSE Sensex one-year return is about 10 percent, but IPO index return for the same period is negative.

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