IPOs Are Back in the Spotlight, But the Past Has a Cautionary Tale

As the primary market heats up with a flurry of public offerings aiming to raise ₹15,800 crore this week, investors may do well to reflect on the lessons of recent history. While IPOs are often seen as quick routes to wealth, the performance of Indian listings between 2021 and 2024 paints a more sobering picture.

A study by Samco Securities reveals that out of 250 mainboard IPOs launched during this period, nearly 48% are now trading below their listing price. While the initial buzz around IPOs continues to attract investor attention, the average listing return from these offerings stood at a modest 38%, a major drawdown for those hoping for rapid gains.

Even more striking, 73% of these IPOs underperformed the Nifty SmallCap 250, and 64% failed to beat the BSE IPO Index, according to the Samco report. Ironically, the BSE IPO Index itself has lagged behind the benchmark Sensex, falling 8.5% year-to-date, while the 30-stock Sensex has risen by 4.5% in the same period.

This underperformance has come despite impressive subscription numbers and frenzied retail participation. Many IPOs that initially dazzled investors have ultimately become a trap of hype and hope.

“Companies are selling big dreams at premium valuations, and most listings fade away after the initial buzz. In reality, many of these newly listed firms quickly lose steam, revealing weak fundamentals behind flashy marketing,” said Apurva Sheth, Head of Market Perspectives & Research at Samco Securities.

Sheth added another strong note of caution for investors caught up in IPO mania. “Public offerings have largely become exit routes for promoters, not entry points for investors. Not every IPO is an opportunity, sometimes, it’s just a well-wrapped exit plan.”

Some of the biggest names to debut during this period have failed to live up to their promise in the secondary market. Firms such as One97 Communications (Paytm), FSN E-Commerce Ventures (Nykaa), Swiggy, and Ola Electric, all of which raised funds between 2021 and 2024, are now trading below their IPO prices.

Beyond high valuations and weak business models, many of these IPOs also faced headwinds post-listing from a broader market correction last year. Analysts at Axis Securities noted that heightened volatility disrupted both new listings and post-IPO performance, with multiple factors compounding to create an unfavourable environment.

The broader market remained jittery, particularly in segments that hosted recently listed firms. Axis Securities further added that IPO momentum had slowed following the listing of Ather Energy in early May. However, it believes signs of revival in the primary market are beginning to emerge.

Looking ahead, analysts at Bajaj Broking suggest investors to focus on the quality of businesses entering the public market, rather than being swayed by excessive hype.

“The upcoming wave of IPOs brings a diverse set of opportunities across sectors. But long-term returns will favour those who align with fundamentally strong companies,” the brokerage said.

Of the dozen IPOs set to go live this week, five are from the mainboard, while seven belong to the SME segment. Bajaj Broking added that while macroeconomic indicators appear favourable and market liquidity remains supportive, the real test lies in sustaining investor interest beyond the headlines and valuations.

“The success of this round of listings could well set the tone for the primary market through the first half of FY26,” the firm noted.