Will IPO euphoria fizzle out in 2025 amid stock market rout? Here’s what experts predict

IPO market 2025: With the Indian stock market experiencing significant selling pressure due to concerns over high valuations, market volatility, and uncertainties in the global economy, the primary market is also feeling the effects of these repercussions. According to market analysts, the year 2025 is expected to pose challenges for the IPO market. The excitement surrounding IPOs that lasted for two consecutive years may come to a halt given the present market situation.

The survey, referencing the E&Y Global IPO trends, noted that India’s participation in global IPO listings increased to 30% in 2024, rising from 17% in 2023, thereby positioning it as the top contributor to primary resource mobilisation worldwide.

As per the Economic Survey (2024-25), the Indian primary markets experienced increased listing activities and strong investor interest in FY25, despite the challenges posed by market volatility and geopolitical uncertainties.

Offer for Sale (OFS) Factor playing out

Nonetheless, under the present circumstances, companies that focus on Offer for Sale (OFS) are experiencing lackluster responses from investors. The prevailing trend in the market indicates that investors generally express discontent since the funds are withdrawn from the company, resulting in no resources being available for its development.

A prime example of this situation is the Hyundai Motor India IPO, which was as an OFS, with Korean parent company Hyundai Motor offloading 14.2 crore shares. This structure meant that the company would not gain any proceeds, as the entire amount would be directed to the parent company.

On the last day, there was robust demand from institutional investors; however, retail investors only purchased approximately half of the shares allocated for them in the Hyundai Motor India IPO. Among the recently launched issues, the Ajax Engineering IPO was fully subscribed but faced its challenges, ultimately being buoyed by Qualified Institutional Buyers (QIBs), and now the Hexaware Technologies IPO is encountering difficulties and is likely to be supported by QIBs as well. Both of these issues are entirely OFS.

Arun Kejriwal, the founder of Kejriwal Research and Investment Services, clarified that during an OFS, people tend to disapprove because the funds are being taken out of the company, leaving nothing for its growth. If all the money raised ends up in the hands of individuals (be it the promoter, a private equity investor, or a mix of both), it’s difficult to see how the company can thrive.

Avoiding new commitments

Secondly, investors are facing significant losses in the secondary market, and the situation is quite severe. Consequently, they are hesitant to invest in the primary market, which has been underperforming for the past few months. This reluctance to make new commitments has led to decreased subscriptions, and the grey market has not provided investors with sufficient reassurance either. A combination of these elements has resulted in reduced subscriptions for the latest offerings, believes Kejriwal.

IPO market 2025 outlook

Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund reiterated the fact that this year has begun with a perfect storm of high valuations, market volatility, and economic uncertainties that have dampened enthusiasm. The impact of recent political events has finally brought some sanity to the irrational exuberance that the markets have experienced for years.

“Currently, the low subscription numbers are just the beginning. Many upcoming issues may not even attract 1x subscription in the months ahead, and that’s when we will start to see deeper pain in the IPO segment.

The Bear party has just begun. Prepare for the tough year up ahead,” added Gulati.

Will the primary market revive?

Kejriwal said for the primary market to begin its revival, it can adopt two approaches. First, provide value for money. This means that the valuations and pricing should be more appealing since they are currently high, the veteran analyst explained.

Second, investors are not inclined to put their money into an OFS, they prefer to invest in a company that has raised funds for its growth. Therefore, capital must flow into the company. In recent cases, most investors’ concerns relate to the OFS nature of the offers.

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 decisions.