Bumper IPO gains shrink in India’s record-breaking primary market

The outsized gains of the past from Indian IPOs will fade in 2025 as investors become more discerning in what remains one of the hottest IPO markets in the world.

The average return for stocks one month after listing has shrunk to 2.9% this year, compared with 22% last year and 25% in 2023, according to a Bloomberg analysis. Meanwhile, about 40% of all motherboard newcomers were trading below their offer price a month after their debut.

Yet India’s primary market remains busy. More than 80 companies will go public in 2025, raising more than $15 billion and raising hopes that proceeds could surpass last year’s record of about $21 billion. But the boom is also gaining attention as investors grow uneasy about paying high prices for companies whose profits are still uncertain.

Windfall from IPOs in India fades | Execution of IPOs one month after debut

Buyers “prefer issuers with strong fundamentals and issues with reasonable valuations,” Kotak Institutional Equities said in a note earlier this month.

Some recent stock market listings, such as Glottis Ltd. and BMW Ventures Ltd., are down 40% and 38%, respectively, below their offering prices. Others have done better: LG Electronics India Ltd. rose 45% after its debut on October 14, while National Securities Depository Ltd. rose by almost 60% in the first month since listing.

Reflecting the broader slowdown, the Edelweiss Recently Listed IPO Fund, one of the few funds focused on newly listed stocks, is down 2.6% so far this year, while India’s benchmark NSE Nifty Index is up more than 9%, putting it within striking distance of surpassing its all-time high set in September last year.

Still, there has been some improvement in the past two months, said Neha Agarwal, head of equity capital markets at JM Financial. “Transaction pricing has become more pragmatic and we are now seeing a degree of discipline and realism returning to the market,” she said.

Whether this trend continues will become clearer in the coming weeks, when eyewear retailer Lenskart Solutions Ltd. and Groww’s parent company, Billionbrains Garage Ventures Ltd., are seeking investor orders for their debut offering.