Is the IPO craze over? Stock market correction hits public listings

India’s IPO market, which has been vibrant with activity in the current financial year, is facing challenges despite a year marked by blockbuster listings.
The year has seen India’s biggest IPO in Hyundai Motors India, which launched a record-breaking IPO worth Rs 28,756 crore. Swiggy’s Rs 11,327 crore listing added another highlight, becoming the second-biggest IPO of the year.
NTPC Green Energy, a subsidiary of NTPC Ltd, will open soon aiming to raise Rs 10,000 crore through a fresh issue and is set to be the third-largest IPO of 2024.
Earlier, Bajaj Housing Finance saw an overwhelming Rs 3.2 lakh crore in bids, reinforcing the market’s strength earlier in the year.
However, recent trends suggest a slowdown, with fewer public offerings and lacklustre subscription numbers. This has raised questions about whether the IPO market is losing its charm.
Subscription figures for IPOs have dropped in recent months. Global economic uncertainty, rising interest rates, and tighter liquidity have made investors cautious.
When IPO valuations appear disconnected from company fundamentals, investors hesitate to commit. This has particularly impacted retail participation, which had previously driven several oversubscribed IPOs.
Several IPOs have debuted with either minimal premiums or at discounts. Experts attribute this to aggressive pricing and market volatility. Without clear growth potential, IPOs fail to attract significant attention on listing day.
“Investors are becoming more discerning,” said Tarun Singh, Founder and MD of Highbrow Securities. “Regulatory changes by Sebi have curbed speculative buying, and valuations are now scrutinised more closely, leading to a focus on fundamentals rather than hype.”
After the excitement generated by this year’s major IPOs, such as Hyundai Motors and Swiggy, investor interest in smaller or mid-sized offerings seems to have waned.
According to Ritin Agarwal, Managing Partner at Fundvice, “High-profile listings have set a high bar, and subsequent IPOs have struggled to measure up. However, this shift may be temporary as the market adjusts.”
While some believe there is IPO fatigue, others argue the decline is not due to a lack of interest but a more cautious approach by genuine investors.
“There does seem to be IPO fatigue in the market. The rapid influx of public offerings has stretched investor focus and capital thin, resulting in many IPOs receiving lukewarm interest and weak support,” said Ritin Agarwal, Managing Partner, Fundvice.
Experts said that Sebi’s recent reforms to curb speculative trading have significantly impacted IPO performance. Restrictions on listing day gains and stricter norms have filtered out speculative traders, leaving behind investors with a long-term view.
“The Securities and Exchange Board of India (Sebi) has tightened norms, making it more challenging for traders to participate. This has led to a decrease in frenzy-driven subscriptions, separating genuine investors from speculative buyers,” said Tarun Singh Founder & MD, Highbrow Securities.
For example, Resourceful Automobile’s IPO, which had no anchor investors but garnered almost 500 times retail subscription, contrasts sharply with Usha Financial Services’ IPO, which received only 20 times subscription despite backing from institutional investors. This shows how regulatory changes have shifted the focus to fundamentals.
Despite the slowdown, experts remain optimistic about the IPO market’s long-term prospects. Singh believes investor interest is intact but more measured. “With regulatory changes and cautious sentiment, the market is undergoing a correction rather than a decline,” he said.
Agarwal predicts a significant uptick in IPO activity soon. “We’ll see larger and more impactful IPOs in the near future, driven by a better alignment between valuations and investor expectations,” he noted.