Large IPO fundraising has not always translated into strong post-listing performance as investors increasingly focus on valuation, timing and fundamentals

India's IPO market has witnessed several mega public offerings in recent years, with companies raising thousands of crores from investors. However, the size and popularity of an IPO have not necessarily translated into sustained gains after listing.

Of the 11 large IPOs that raised more than ₹9,500 crore each since 2021, seven are currently trading below their respective issue prices, according to the data cited in the report. The latest addition to this group is the National Stock Exchange of India (NSE), which raised ₹22,563 crore through its IPO earlier in September.

The seven companies collectively raised approximately ₹1.05 trillion through their public offerings. Their combined market value has subsequently declined to around ₹88,979 crore, representing a reduction of approximately 15.3% from the capital raised through their IPOs.

Mega IPOs fail to guarantee post-listing gains

The performance of several large IPOs highlights the difference between strong primary-market demand and sustained secondary-market performance.

Quick-commerce platform Swingy is currently trading around 35% below its issue price, while Paytm parent One 97 Communications is about 22% below its IPO price, according to the data cited in the report.

Other large offerings, including NTPC Green Energy, HDB Financial Services, Life Insurance Corporation of India (LIC) and the recently listed SBI Fund Management, are reported to be trading between approximately 10% and 17% below their respective issue prices.

The data indicates that investors who participated in some of India's largest public offerings have experienced substantial differences in post-listing returns.

Four mega IPOs remain above issue price

Not all large IPOs have struggled after listing.

Among the 11 mega issues covered in the analysis, four companies are trading above their issue prices.

Tata Capital is trading approximately 1.5% above its issue price of ₹326 per share, while Hyundai Motor India is around 7% higher than its issue price.

The stronger performers include LG Electronics India and ICICI Prudential Asset Management Company, whose shares are reported to have gained approximately 53% and 50%, respectively, from their issue prices.

The divergence demonstrates that IPO size alone does not determine subsequent stock performance.

NSE IPO slips below issue price

The NSE IPO provides a recent example of how post-listing price discovery can differ from initial investor expectations.

The exchange operator's shares fell below their ₹1,785 issue price earlier this week following a relatively muted debut on the BSE on September 24.

The stock closed at ₹1,769.30 on Tuesday, below the issue price, and had declined approximately 6% from its listing-day high of ₹1,878.

The stock also touched a low of around ₹1,761 on September 28.

The NSE issue was the second-largest IPO in India, behind Hyundai Motor India's ₹27,859-crore offering in October 2024, according to the data cited from PRIME Database.

IPO pricing emerges as a critical factor

Market participants cited in the report have highlighted IPO pricing as one of the key factors determining how a large public issue performs after listing.

According to G Chokkalingam, founder and head of research at Equinomics Research, pricing and the timing of an IPO are important considerations for investors.

Attractive pricing combined with strong fundamentals can influence investor participation and provide greater comfort during the listing process. Conditions in the secondary market can also influence how investors respond to new issues.

The observation is particularly relevant for mega IPOs because large fundraising exercises can create substantial expectations around valuation and future growth.

Timing matters alongside valuation

The broader market environment at the time of listing can have a significant influence on post-IPO performance.

When secondary markets are strong, investors may be more willing to absorb new offerings at higher valuations. Conversely, weak or volatile equity markets can put pressure on newly listed companies even when the underlying business remains unchanged.

This creates an important distinction between company fundamentals, IPO valuation and broader market sentiment.

A company with strong financial performance can still experience post-listing volatility if its issue valuation leaves limited room for further appreciation.

Why some large IPOs outperform others

The performance of the mega IPOs shows that investors have differentiated between companies based on their valuation and perceived growth prospects.

LG Electronics India and ICICI Prudential Asset Management Company, for example, have delivered substantial gains relative to their issue prices in the period covered by the analysis.

Meanwhile, several other large offerings have remained below their IPO prices.

The difference suggests that investors have not treated all mega IPOs uniformly and that factors such as earnings visibility, valuation, sector outlook, business quality and market conditions can influence secondary-market performance.

Primary market may remain active, but listing gains could moderate

The Indian primary market is expected to remain active, with a substantial pipeline of companies seeking to raise capital.

However, market participants quoted in the report suggest that if the secondary market remains subdued, the number of fresh issues and the magnitude of listing gains could moderate.

This could result in greater investor selectivity, particularly for large offerings seeking premium valuations.

For companies preparing to launch IPOs, the prevailing market environment could therefore become increasingly important in determining both investor demand and post-listing performance.

What investors should examine before a mega IPO

The recent performance of large IPOs highlights several factors investors can examine before subscribing to a public issue:

• IPO valuation: Compare the issue valuation with listed peers and the company's earnings.

• Business fundamentals: Examine revenue growth, profitability and balance-sheet strength.

• Future growth visibility: Assess whether the company's expansion plans can support future earnings.

• Use of IPO proceeds: Understand how fresh capital will be deployed.

• Market conditions: Consider the broader equity-market environment at the time of listing.

• Secondary-market valuation: Compare the IPO price with prevailing valuations of comparable listed companies.

• Promoter and shareholder structure: Review dilution, offer-for-sale components and post-IPO ownership.

• Cash-flow generation: Assess whether accounting profits are translating into operating cash flows.

IPO subscription does not guarantee returns

One of the important lessons from the performance of India's mega IPOs is that subscription levels and post-listing returns can diverge significantly.

An IPO can attract substantial demand during the subscription period because of institutional participation, limited share availability or strong investor interest in a particular sector. Once trading begins, however, the stock is subject to continuous price discovery based on market expectations.

Consequently, a heavily subscribed IPO can still trade below its issue price, while a moderately subscribed offering can potentially perform differently after listing.

Mega IPO performance at a glance

Market Outlook

India's primary market continues to attract companies looking to raise substantial amounts of capital, but the recent performance of mega IPOs suggests that IPO size and subscription demand should be evaluated alongside valuation and business fundamentals.

If secondary-market conditions remain subdued, investors may become more selective toward new offerings, particularly those seeking aggressive valuations. For upcoming IPOs, issue pricing, earnings visibility, sector conditions, balance-sheet strength and the intended use of funds are likely to remain key factors in determining post-listing performance.

The contrasting performance of large IPOs also indicates that the period immediately after listing is only the beginning of price discovery. Investors will continue to assess whether companies can deliver the earnings growth required to support their post-IPO valuations.