Dalal Street volatility hits IPO market in February; 85% of stocks trade below issue prices

The Indian IPO market, which has seen unprecedented demand from investors in recent years, has cooled down recently as a sustained sell-off in the equity market has dented investor sentiment, causing them to move away from bidding, as evidenced by the weak subscription numbers for new issues in February.

A majority of the companies that raised funds last month have seen a lukewarm demand for their issues. Data shows that retail investors, whose portion usually sees strong demand for SME issues, received significantly lower subscriptions compared to previous months, reflecting cautious sentiment amid market volatility.

Looking at the data, 21 companies raised funds from Dalal Street investors last month, with 80% of the issues coming from the SME category, while the rest were from the mainboard segment, according to Trendlyne data. Collectively, these 21 companies raised ₹14,750 crore last month, with Hexaware Technologies accounting for the largest share, as its issue size was ₹8,750 crore.

Weak listings and low subscription rates dent February IPO performance

Both the SME and mainboard categories have received subdued demand from investors, as 15 out of 17 SME issues recorded a total subscription rate of less than 50 times, significantly lower compared to January, when 17 out of 22 SME issues saw subscription rates of 100 times or more. 

Ten issues received a subscription rate of less than 10 times in the retail segment, and only two managed to secure a subscription rate of over 100 times. This marks a sharp contrast to January, when 26 out of 29 IPOs saw subscription rates ranging between 54 and 950 times in the retail segment.

In the mainboard segment, all four issues received a weak response from investors, with Quality Power Electrical securing an overall subscription rate of just 1.3 times. The poor response to IPOs in February also resulted in weak debuts on exchanges.

Meanwhile, the weak market sentiment is not only influencing investors to take a cautious approach but also affecting companies that are planning to list their shares on exchanges in 2025.

Recent reports suggest that prolonged weakness in the secondary market is prompting companies to postpone their listing process on Dalal Street while also cutting their issue size and valuations to align with weak market sentiment.

18 stocks slip below listing prices

Taking the current trading prices of all 21 stocks into account, 18 (85%) are now trading below their issue prices, with Readymix Construction emerging as the top laggard with a drop of 52%, followed by Ken Enterprises and Malpani Pipes And Fittings, which are currently 49% and 33% below their IPO prices.

Looking at 2025 data so far, 39 out of 51 IPOs are currently trading below their issue prices, with GB Logistics Commerce emerging as the weakest performer, trading at a 60% discount to its IPO price. It is followed by Citichem India and Davin Sons Retail, both of which are trading 55% below their issue prices, Trendlyne data showed.

Apart from IPOs, retail investors’ other favourite, the small-cap segment, is also bearing the brunt of the heavy sell-off, experiencing significant market value erosion and leaving portfolios deep in the red.

Retail participation in the Indian stock market has grown substantially in recent years. Millennials, in particular, are actively investing in equities, mutual funds, and ETFs. This robust participation has been a key factor behind the unprecedented surge in Indian equities over the past few years.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.