Data for IPOs listed during the year shows that about 66% of companies are currently trading below their issue price, meaning investors have lost money in roughly two out of every three listings. As many as 15 IPOs that hit the market in the last one-year period are trading 50% below their respective offer prices. Glottis, VMS TMT, Mangal Electrical, Jinkushal Industries and Shree Ram Twistex were among the major losers, eroding value by up to 70%.
The trend marks a sharp reversal from the euphoria seen in recent years, when IPOs routinely delivered strong listing gains and sustained post-listing returns.
The shift reflects a broader reset in market dynamics. Equity markets have come under pressure over the past one and a half years, with the broader midcap and smallcap segments witnessing even sharper declines. Most of the IPOs hitting the market were concentrated in these segments, making them more vulnerable to risk-off sentiment.
In such an environment, investor behaviour has changed decisively. Where IPOs were once seen as quick-return opportunities, they are now being approached with far greater caution. Analysts say investors are increasingly unwilling to chase new listings, especially when valuations appear demanding against a weakening market backdrop.
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The macro environment has also turned less supportive. Heightened geopolitical tensions, particularly in West Asia, have added to volatility across asset classes this year. Rising crude oil prices and a weakening rupee have further complicated the outlook, creating uncertainty around inflation, growth and capital flows.
These factors have had a direct impact on primary market performance. When uncertainty rises, investors shift away from riskier bets such as IPOs and instead allocate capital to established companies trading at more attractive valuations in the secondary market.Valuation remains a central concern. Several companies that came to market during the year were seen as priced on the aggressive side. In a rising market, such pricing can be absorbed by liquidity and optimism. In a correcting market, it becomes a key reason for underperformance.
The experience of recent listings reflects this clearly. Companies that debuted with strong subscription numbers and even positive listing gains have struggled to hold those levels, with many now trading significantly below their issue price. In several cases, the erosion has been steep, indicating that initial demand did not translate into sustained investor confidence.
Subscription trends also point to a cooling of enthusiasm. Unlike the IPO boom period, when issues were oversubscribed multiple times across categories, recent offerings have seen more moderate participation. In some cases, demand has been barely above subscription thresholds.
The grey market, often seen as a barometer of listing expectations, has also reflected this change. Premiums have either narrowed or turned negative for many recent IPOs, indicating muted expectations even before listing. This contrasts with earlier phases when strong grey market signals often translated into robust listing gains.
Analysts view the current phase as a correction rather than a structural breakdown. The IPO market had seen a period of excess liquidity and optimism, allowing companies to command premium valuations and investors to chase returns aggressively. The current underperformance is, in part, a normalisation of that cycle.
Khushi Mistry of Bonanza Portfolio said the slowdown is tied to weakening risk appetite. Investors, she said, are increasingly focused on averaging down existing holdings rather than committing fresh capital to new listings, and activity may remain subdued until broader markets stabilise.
Analysts also point to a supply-side adjustment. Companies are becoming more cautious about launching IPOs in the current environment, aware that weak sentiment could lead to poor reception and pricing pressure. This has led to a more measured pipeline despite underlying fundraising needs.
Uday Patil of PL Capital Markets said the hesitation among issuers reflects current market conditions rather than a deeper structural issue. Volatility in secondary markets and valuation concerns have dampened demand, making companies wary of timing their offerings.
Investment bankers maintain that the pipeline remains intact. Bhavesh Shah of Equirus Capital said the slowdown is largely sentiment-driven, suggesting that activity could revive once market conditions improve and investor confidence returns.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)