Within a year, Indian IPO markets have gone from being ecstatic to being muted. Foreign institutional investors have pulled back, retail money has also retreated, and valuations of issues that are currently going to market are down 25–30% from their 2024 peak.
The fundraising activity this year is looking dismal so far, and it might take a few more quarters before there is a turnaround, according to Yatin Singh, CEO, Investment Banking at Emkay Global Financial Services.
Here are a few edited quotes from the discussion
What do you think caused the 2026 IPO market to cool off so precipitously?
It boils down to the three investment segments: retail, foreign institutions, and domestic institutions. Two of the three are now absent.
For some time now, FIIs have been unfavorable to India. In terms of market value, India has historically been a costly country, and a significant portion of FII flows have an American bent. Investors are waiting to see because of the unclear Indo-US trade dynamics. Furthermore, there is not a recognizable major AI theme in India. The majority of the world’s money has gone toward the AI sector, which includes chips from the US, China, Taiwan, and South Korea. India is just not now involved in that story.
The migration of even domestic retail investors is a more recent development. After approximately a year of investing in the stock market with no results, they witnessed gold soar. Net new funds into gold ETFs have increased significantly during the last five or six months, surpassing stock inflows last month, according to AMFI data. That is the turning point.
Through SIP flows, domestic mutual funds are keeping things afloat, but the majority of those SIP funds are being used to sustain their current secondary market positions. That is what drives IPO demand: those mutual funds will not have to look at fresh paper until FIIs start making significant purchases and some retail investors come back.
Q: Since the 2024 top, valuations have decreased by 25–30%. Why do businesses continue to enter the market at those levels?
What are your options? Listing is currently preferable than going to private markets, even with a 30% haircut. Your value will be considerably lower to buyers on the private market. Additionally, since banks require collateral and profitability, debt is not even an option for the new, asset-light, loss-making company models that are currently entering the market. Not all businesses have that.
Examine Fractal; its pricing was significantly lower than its pre-IPO round. Compared to its previous private round a few years prior, Amagi was 40% off. This is taking place everywhere.
What would cause someone to recover?
A rising number of people believe that the AI trade is a bubble and has been exaggerated. That capital needs a new home when that unwinds. Emerging markets will receive a portion of it, with India receiving a substantial portion. Therefore, even if India has little AI history, a reversal of the AI trade might really be a catalyst for the country.
All three investor segments must be “in the mood” at the same time for IPO markets in particular. When they are, initial public offerings (IPOs) receive 70, 80, and 100 subscriptions, and all of those bull market outcomes are very attainable. Even when an initial public offering (IPO) is successful in the current climate, participation levels are far lower than in the past.
Have you noticed any changes in the type of initial public offerings (IPOs) since last year?
There were many IPOs worth between Rs 400 and Rs 600 crore that took place in 2024, and there were a lot of deals with smaller average values. Any IPO under Rs 700–800 crore has all but disappeared today. As a banker, I do not assess the state of the market based on the total amount collected, even though the overall fundraising figures may appear acceptable on paper due to the larger deals that are taking place. The quantity of successful IPOs of all sizes is how I measure it.
It also decides the league table winners. Large transactions go to Wall Street banks like Morgan Stanley and JP Morgan, particularly for modern businesses that must market in the US under 144A regulations. The domestic investment banks get more and smaller agreements. Thus, 2025 has been a year for international banks. Like the previous few years, 2024 was a domestic bank year.
Why is the OFS-portion of IPOs increasing so much?
There are two distinct events taking place. For PE funds, it is simple: they must eventually exit because they are legally closed-ended vehicles. One way to carry out that exit is through an IPO.
While opportunism plays a role in OFS for promoters, SEBI’s rules on fresh issue capital also play a significant role. If you raise new money through an IPO, you have to specify exactly what you will use it for, you have to meticulously record everything, and you can not modify the use case later since it is not fungible and there is a lot of red tape.
On the other hand, there are practically no significant compliance obligations with OFS. Many modern businesses, including Swiggy, Zomato, and others, have entered the market mostly through OFS, gone public, and then, six months later, completed a QIP to raise expansion capital. QIPs do not need any of those paperwork. The majority of people are unaware that this is the strategy, which enables promoters to circumvent SEBI regulations.
What problem are you especially excited about, and why?
PhonePe has me thrilled. Because it is a Walmart-owned firm conducting an initial public offering (IPO) in India, there will be unique compliance challenges that will serve as case studies for the sector as a whole. It will also be a significant problem, and if it succeeds, the market as a whole usually benefits.
More significantly, though, GPay and PhonePe account for more than 70–80% of the UPI pie. In essence, the IPO is a stand-in for UPI, which is, in my opinion, one of the most significant developments in India. Before QR codes, there was a life, and now there is a life.
