Excited about the $20 billion pipeline? Vikas Khemani says 80% of upcoming IPOs have poor business quality

India’s record-breaking IPO year is drawing global attention, but one of the country’s prominent market voices says the pipeline quality gap is rapidly widening. Vikas Khemani, founder of Carnelian Capital, said after consulting with investment bankers that barely 5% of companies were worth meeting, and almost none struck the right balance between business fundamentals and valuation.Khemani said nearly 80% of the IPO candidates he saw were “poor company quality,” and 50-60% of companies don’t even meet IPO prices. The problem, he argued, is not that all the companies entering the market are bad, but that supply has increased so much that standards are slipping. He warned investors to “be extra careful” and urged institutional investors to raise the quality bar even higher.

His comments come at a time when India’s IPO market is seeing its strongest pace in almost two decades. According to JP Morgan, emissions have already exceeded $21 billion this year and could exceed $23 billion next year. According to the bank, $20 billion a year is now the new norm in India for primary markets, with at least 20 large private startups preparing to go public in the coming quarters.

The glut of supply has pushed India past the 100-listing mark for the first time since 2007, with big names like Meesho and ICICI Prudential AMC driving the deal momentum. But the wave also brings challenges. Trading day returns have narrowed, with average first-day returns falling to 9.4%, the lowest since 2018, due to investor fatigue and high valuations.

Khemani’s comments highlight a growing gap between private market expectations and public market price discipline. Several founders are looking for valuations that investors believe are not supported by growth visibility or profitability metrics.

Also read: India’s IPO frenzy reaches century, shatters 18-year record, but the days of easy money are over

In many cases, Khemani said, the valuation did not matter if the company appealed, and if the valuation looked fair, the underlying business was not sustainable. His warning echoes what some market participants have been quietly signaling. Market interest in new IPOs has driven fringe companies to test the IPO route, hoping to price in peak optimism. As institutional investors become more selective and retail investors become more cautious following recent underperformers, the bar for new listings continues to rise.

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