The euphoria around IPOs appears to be missing among retail investors, as captured in the muted response to some of the recent public issues, with the underwhelming retail subscription hinting at shifting investor sentiment.
Market experts believe retail investors may now be getting selective, and no longer getting swayed by grey market premiums alone, as a flood of fresh issues look to hit the primary markets soon. Instead, aspects like valuations, fundamentals, and quality of promoters are weighing more on the decision to subscribe to an IPO, said some money managers.
This is the first time since 2022 that the average retail participation in IPOs has declined in a year.
The average number of retail applications in IPOs in 2025 - till May 24 - was around 16.7 lakh, lower than last year’s 18.9 lakh, as per Prime Database. The last time this metric fell was in 2022 when the average number of retail applications in IPOs plunged to 5.66 lakh from 14.45 lakh in 2021.
The year 2022 was a subdued year for IPOs, as the total fund raising nearly halved to around Rs 59,300 crore from Rs 1.18 lakh crore in 2021, which was a record at that time. The pandemic year frenzy of fundraise was broken last year, with Rs 1.60 lakh crore raised through IPOs.
The IPOs of Schloss Bangalore (Leela Hotel) and Aegis Vopak Terminals both saw the retail segment of the public issue undersubscribed at 83 percent and 77 percent, respectively. Interestingly, the IPO of Belrise Industries, which closed just days before the two IPOs opened, saw its retail segment subscribed nearly 4.3 times.
“Investors, especially retail, have become quite choosy and selective. While earlier, retail investors used to decide on an IPO based on the grey market premium, the new age investor now does proper homework before deciding to invest,” said Rakesh Choudhari, Managing Director, Keynote Capital.
“Metrics like P/E multiples, RoI etc are looked closely given the easily accessible tools that trading platforms now offer. No one prefers fancy valuations any more. Issuers need to keep in mind that investors are quite conscious about valuations and there is no dearth of fresh supply so even if they avoid a few issues they do not feel left out,” Choudhari added.
Data from Prime Database shows that the number of retail applications have taken a hit after January 2025. On an average, more than 32 lakh retail applications came in for IPOs that were launched in January, however, the average drastically drops to less than two lakh if all subsequent IPOs are taken into account.
Market experts believe that bunching of issues could also be a factor for demand dilution. This has significance for merchant bankers, promoters as well as investors, since the coming months are likely to see a large number of IPOs gear up for launch.
“When multiple issues hit the market in quick succession, it can ideally lead to dilution in demand but given that mutual funds are sitting at multi-year high levels of cash positions (7% of Equity AUM as on April 2025), the capacity to absorb the influx of IPOs is surely there,” said Raghav Gupta, Joint CEO, IIFL Capital.
“I strongly believe that issuers with differentiated business models, sound fundamentals, and reasonable valuations are still likely to garner healthy interest… there is a growing concern about overvaluation, especially for start-ups & loss-making companies. That said, a strong macro backdrop, resilient retail flows, and sectoral diversification can mitigate some of the risks,” added Gupta.
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