India’s IPO boom faces a reality check as investors no longer buy every story

India's IPO market is heading into the next Samvat year with a sizeable pipeline of companies looking to go public, even as investors become increasingly selective about the businesses they are willing to back.

After a year of strong fundraising and a flurry of listings, investor focus is shifting from the volume of issuances to the quality of companies entering the market, the valuations they command and the visibility of their earnings.

As many as 124 companies have valid Securities and Exchange Board of India (Sebi) approvals to launch initial public offerings (IPOs), seeking to collectively raise ₹2.45 trillion, according to Prime Database. Another 130 companies are awaiting regulatory clearance after filing their offer documents.

Meanwhile, as many as 78 Indian companies raised a record ₹94,205 crore through mainboard IPOs in H1FY27, 35% more than the previous high of ₹69,533 crore raised by 65 IPOs in the same period last year, according to Prime Database.

However, a large pipeline and strong fundraising numbers do not mean investors are willing to back every issuer.

Market participants say investors are increasingly scrutinising valuations, earnings visibility, governance and the quality of the offer, with businesses that have credible growth prospects and sustainable business models better placed to attract capital.

Among the companies that have recently filed their draft red herring prospectuses (DRHPs) are Mahanadi Coalfields, Abakkus Asset Manager, JSW One Platforms, Mount Everest Breweries, Biocon Electric, and Royal Chain, among others.

A Samvat year corresponds to a Hindu calendar year of nearly 12 months. In India's financial markets, the new Samvat year begins with Muhurat Trading, a special one-hour stock market session held on Diwali and considered auspicious. This year, Diwali falls on 8 November.

Scepticism builds up

“The pipeline is deep and healthy,” said Neha Agarwal, managing director and head of equity capital markets (ECM), JM Financial.

JM Financial led the investment banking league table for IPO mandates in H1FY27, managing 22 issues by volume, according to Prime Database.

With 254 potential companies looking to list, “issuers clearly want to access the market,” she said.

“Investors remain willing to commit capital, but they are more focused on pricing discipline, quality of earnings and the resilience of business models to higher energy costs, currency movements and inflation,” she said.

Deals are getting done, but timing, pricing and structure matter more, she added.

If volatility persists, Agarwal sees some issuers waiting for calmer conditions, but the underlying demand for good-quality paper remains intact.

Amit Ramchandani, managing director and chief executive at Motilal Oswal Investment Advisors, pointed out that while the pipeline for the rest of FY27 remains healthy, market conditions have become more challenging, with investors adopting a more measured approach to new issuances.

Private equity (PE) funds have managed to secure exits through several IPOs, said P. Krishnan, managing director and chief investment officer - equity asset management at Spark Investment Management. Most of these exits have been through offer-for-sale (OFS) components, with India being the only market where PE investors have been able to exit smoothly, seemingly helped by an insatiable investor appetite, he said.

It, therefore, comes as no surprise that the supply of papers has gone up. It is a bonanza for sellers, but caveat emptor (let the buyer beware), Krishnan said.

He warned that if investor appetite remains this strong, the supply of IPOs could continue to rise until one or more major setbacks occur. “The valuations at which these IPOs are being sold and the listing gains (and in some cases subsequent gains) have no precedents of sustaining across geography or history.”

The listing pop has been quite uneven. ESDS Software Solution, which listed in September, surged 111.75%, while Meesho made a strong debut in December 2025, jumping 53.23%. LG Electronics, too, clocked listing gains of around 48% after its debut on 14 October last year, showed data from ACE Equity.

In contrast, SBI Funds Management's IPO delivered a relatively modest listing gain of 6.2% in July. NSE, the largest IPO after Jio Platforms, listed in September with a gain of just 2%. Some IPOs even slipped below their issue prices. Fractal Analytics, which listed in February this year, saw a loss of around 6%, while LEAP India, which went public in August, declined about 9% on debut, data showed.

While geopolitical uncertainty, high crude prices and global volatility have dampened sentiment, particularly among foreign investors, green shoots are emerging, with appetite gradually returning for quality issuances, Motilal Oswal's Ramchandani said.

Overall, public equity fundraising rose 75% to a record ₹2.43 trillion in H1FY27, from ₹1.39 trillion in H1FY26, said Pranav Haldea, managing director, Prime Database Group, in a 1 October note.

Besides IPOs, funds raised through offers for sale (OFS) by existing investors, primarily driven by government disinvestment, and qualified institutional placements (QIPs) also saw a significant uptick, he added.

What is catching investors' eye?

Businesses with strong fundamentals, credible growth prospects, scalable models and clear earnings visibility continue to attract investor interest. However, valuations, the quality of the equity story and execution certainty have become increasingly important to successful fundraising, investment bankers said.

“Investors are placing greater emphasis on sustainable profitability, cash generation and reasonable valuations rather than growth narratives alone. This trend is also visible in the broader ECM market, including QIPs and other fundraising formats,” said Ramchandani.

Agarwal of JM Financial pointed out that financial services, healthcare & pharma, precision manufacturing and capital goods, renewables and energy transition, and R&D-led businesses have all drawn interest. Companies that benefit from domestic consumption, infrastructure investment and the broader "India growth" theme tend to resonate, she added.