The Indian IPO market is witnessing significant growth driven by robust domestic risk capital, as noted by Sunder Iyer, partner at Deloitte India. However, maintaining a healthy capital market necessitates active involvement from all investor groups, including foreign funds, to bolster India's position in global markets.
Favorable macroeconomic conditions and sectoral tailwinds are propelling broad-based corporate growth, enabling small and mid-sized companies, particularly in BFSI, consumer, and technology sectors, to reach IPO scale. Additionally, strong private equity and venture capital investments over recent years are contributing to a pipeline of exit-led IPOs.
As of June 5, 168 companies have received approval from the Securities and Exchange Board of India (Sebi) for their IPOs, collectively aiming to raise around ₹2.60 lakh crore, according to Prime Database. Furthermore, approximately 70 companies are awaiting regulatory approval to raise nearly ₹1.41 lakh crore via IPOs.
“What's structurally different this time is the depth and consistency of domestic risk capital.”
Sunder Iyer, Partner at Deloitte India
The demand side is also evolving, with domestic institutional investors growing due to rising SIP flows and increased financialisation of household savings. Despite relatively low participation from pension funds and corporate treasuries, domestic investors offer flexibility in allocation sizes, attracting participation even in ₹250-750 crore IPOs.
However, the increasing number of IPOs could lead to a more crowded market, prompting investors to become more selective. Companies with strong governance, capital discipline, and clear earnings visibility are likely to attract premium valuations, while weaker entities may struggle despite operating in attractive sectors.
“The era of 'all boats rise with the tide' is unlikely to persist indefinitely.”
Adeepto Saha, Executive Director at Deloitte India
Background
The Indian IPO market has historically relied on foreign investment to drive growth. However, recent trends indicate a shift towards stronger domestic participation, driven by increased financialisation of household savings and robust private equity and venture capital activity.
The evolving IPO landscape underscores the need for investors to exercise greater selectivity, focusing on differentiated returns and scrutinizing earnings quality, business models, and valuations. This could result in increased valuation dispersion within sectors and deepen secondary market opportunities.
