India’s primary market has witnessed a remarkable transformation in just two years, shifting from a strong position to an exceptional one. Between 2024 and late 2025, over 200 mainboard IPOs and numerous SME offerings have collectively raised Rs 3.2 lakh crore, propelling India to the rank of the fourth-largest IPO market globally, trailing only the US, China, and Hong Kong.
The excitement in the market is evident: retail investor participation has doubled, oversubscriptions are soaring to unprecedented levels, and discussions about gray-market premiums have become common at dinner tables. However, beneath the enthusiasm lies a concerning fact – one out of every four IPOs introduced in 2025 is currently trading below its initial issue price.
The attraction of quick profits is undeniable. In 2024, 80% of IPOs (74 out of 93) debuted with a premium, delivering an average gain of 30% on listing day. This trend continued into early 2025, with more than half of the new listings starting on a positive note, although the average initial gain decreased to 12.7%.
For short-term traders, the allure of investing in IPOs seemed irresistible. However, by the third month of 2025, half of the year’s IPOs had turned negative, wiping out potential gains. Median post-listing returns dropped below 5%, marking the lowest figures since 2020. The pivotal time between allotment and listing, often just 48 hours, determined the success or failure for many investors who held onto their shares after the initial hype.
The underlying issue lies in the pricing of IPOs. For instance, consider LensKart, one of India’s most prominent eyewear IPOs. Initially valued at Rs 7,200 crore in mid-2024, it quickly aimed for a valuation of Rs 70,000 crore within months – a tenfold increase despite modest profits. Such valuations implied high P/E ratios and price-to-sales multiples comparable to tech firms in Silicon Valley, rather than traditional retail businesses.
Analysts highlighted that a significant portion of the funds raised by many new-age IPOs was allocated to operational expenses rather than expansion, providing substantial gains for private equity investors. This trend was not unique to LensKart, as several high-profile IPOs between 2021 and 2025, such as Paytm, Nykaa, and MamaEarth, debuted at elevated valuations only to experience significant declines within a year.
The narrative of who profits from IPOs reveals a stark contrast. Early investors in Paytm, such as Elevation Capital and SAIF Partners, purchased shares at a fraction of the IPO price and exited with substantial returns, while retail investors who entered at the issue price faced losses. This pattern repeats across various IPOs, underscoring the advantage that institutional investors often have over retail participants in timing their exits.
In India, a considerable portion of IPO fundraising in 2025 stemmed from Offers for Sale (OFS), primarily facilitating exits for promoters and private equity funds rather than injecting fresh capital for business expansion. The surge in IPO demand is largely fueled by domestic mutual funds and households, accounting for a significant share, while foreign investors have been divesting from Indian equities. The influx of funds through monthly SIP inflows has prompted fund managers to seek investment opportunities, with IPOs serving as a viable option amid stretched secondary market valuations.
This scenario has led to a localized bubble where abundant local capital competes for limited attractive assets. Oversubscription ratios exceeding 50 or 100 may not necessarily indicate robust global confidence but rather reflect surplus Indian liquidity seeking investment avenues.
A comprehensive evaluation of post-listing performance reveals a different narrative by late 2025. A quarter of IPOs are trading below their issue price, with median listing-day gains of 5% for mainboard IPOs and 4.8% for SME IPOs, down from 13% in 2023. The IPO surge has not translated into improved portfolio returns but has instead redirected liquidity from secondary markets, potentially affecting index performance.
While IPOs play a crucial role in capital formation, investors must differentiate between IPOs that channel funds into growth opportunities and those influenced by OFS-driven strategies that primarily shuffle ownership. Patience is advocated as a wise strategy, as historical data indicates that stocks trading significantly below their issue price often rebound once valuations stabilize.
Real wealth creation stems from the sustainable growth of quality businesses acquired at reasonable prices, rather than chasing listing-day gains. Notable success stories like D-Mart’s IPO in 2017, which has seen substantial value appreciation since its debut, emphasize the importance of prudent valuation, consistent execution, and a long-term investment approach.
In conclusion, the allure of high subscription rates in IPOs should not overshadow the critical factor of valuation in wealth creation. Timing in IPOs is often advantageous to sellers, urging investors to exercise caution and focus on long-term value rather than