IPO market outlook: Poor market sentiment, valuation concerns roil road for upcoming IPOs, say experts

IPO market outlook: The initial public offering (IPO) market, which was once filled with a flurry of activity and numerous issues in the mainboard sector, has now become quite subdued. While there are some upcoming issues in the Small and Medium Enterprises (SME) IPO segment, the mainboard IPO has seemingly lost its appeal. Given the current market conditions, where the Nifty 50 has consistently been declining, dropping 16% year-to-date amidst a weak trend in global markets, continuous foreign fund withdrawals, and worries over US tariffs, both investors and companies are approaching new ventures with considerable skepticism.

Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities explained that IPO market mood depends significantly on the secondary market sentiments and we all know how markets have performed in the last 4-6 months.

Nifty 500 has undergone a significant correction, falling nearly 20% from its all-time high of 24,573, recorded in September 2024. In today’s session, the index came close to retesting the panic low of 19,624 marked during last year’s election result day, hitting an intraday low of 19,658, highlighted Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

Two Major Concerns

As per analysts’ reports, India’s IPO market was poised for an eventful year in 2025, with a surge in public offerings demonstrating the robust growth of India’s capital markets and presenting appealing investment prospects; however, escalating global tensions have gradually altered this scenario.

According to a report by smallcase, several prominent companies are intending to go public, including Reliance Jio – the telecom giant’s eagerly awaited IPO is anticipated to value the firm at ₹8 lakh crore; LG Electronics India – aims to generate ₹15,000 crore through an offer-for-sale; Ather Energy – the electric vehicle maker is targeting ₹4,500 crore; Zepto – a quick commerce startup that seeks over $1 billion; JSW Cement – has filed for an IPO valued at up to ₹4,000 crore; NSDL – is planning to raise ₹3,000 crore through an offer-for-sale; and boat – a consumer electronics brand intending to list publicly with an issue size of ₹2,000 crore.

Experts say that negative market sentiment and valuations are the two main issues at play here.

Arun Kejriwal, the founder of Kejriwal Research and Investment Services, mentioned that there are numerous IPOs waiting to launch, but two significant issues exist – one being the valuations and the other the unfavorable market conditions. Statistically, out of the last 20 mainboard IPOs as of Friday, February 28, half, or 10, are trading below their issue price, which is concerning. This trend is troubling, leading to increased apprehension among investors regarding IPOs. The first half of March does not show much activity either. The most recent IPOs struggled to gain subscriptions based on qualified institutional buyers (QIBs), and they are currently trading about 13-14% below their issue price.

In such a situation, investors are hesitant to enter the market, and promoters or merchant bankers are reluctant to set appropriate prices, with everyone seeking higher multiples. Consequently, this is not an ideal time for attracting significant subscriptions, and participants are staying cautious.

Prashanth Tapse, Research Analyst and Senior Vice President of Research at Mehta Equities, added that if we analyze a recently listed company’s current price with the issue price, listing price, and all-time high, almost 70–80% of the stocks are trading down by 25%–50% or even more from the all-time high price, which is creating discomfort among the investors as well as the promoters. In the short to medium term, the trend would continue to remain neutral until FII selling pressure neutralizes and global uncertainty settles down.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.