Indian IPO market in transition: Key trends of 2024 and what lies ahead in 2025

The year 2024 has marked a record-breaking fundraising milestone in the Indian IPO landscape, with a significant number of public issues. As the year comes to an end, investors are now shifting their focus to 2025, raising the question: will the momentum continue?

Let's explore what 2025 holds for IPO activity in India. But first, as investors, we must examine the trends of 2024.

A record-breaking year sets the tone

2024 witnessed the highest IPO activity in a decade, both in terms of funds raised and the number of public issues. This remarkable growth reflects strong investor appetite and the confidence of companies in India’s capital markets.

While larger IPOs dominated headlines, smaller offerings gained notable traction by delivering better listing-day returns in many cases.

What’s driving IPO momentum?

• Economic Optimism: A stable macroeconomic outlook and broad-based growth across industries have encouraged companies to raise funds, primarily for expansion.
• Retail Investor Growth: India’s rapidly expanding retail investor base is a critical driver of demand for public issues, especially smaller IPOs.
• Attractive Valuations: A recent market correction from September highs has made IPO entry points more appealing to investors.

Shift in investor preferences

An interesting trend emerged in 2024: smaller IPOs, often from mid-sized companies, experienced greater enthusiasm and stronger listing gains compared to larger issues.

However, this trend is now facing challenges. Retail and HNI (high-net-worth individual) participation in larger IPOs has declined due to market volatility, economic uncertainties, and slower-than-expected interest rate cuts. The RBI recently kept the repo rate unchanged at 6.5%.

What’s in store for 2025?

If we examine the pipeline for 2025, there’s a healthy mix of both large and small public issues. Over 80 companies are in various stages of filing with regulatory authorities, planning to raise substantial funds in the coming months.

• Large IPOs to Dominate Headlines: Mega-sized IPOs from established companies are expected to capture attention, though their performance will depend on broader market sentiment.
• Small and Mid-Sized Companies to Shine: The momentum is expected to continue in smaller IPOs, providing investors with opportunities to tap into high-growth potential businesses.

What about investor sentiment?

Factors like high interest rates, geopolitical uncertainties, and fluctuating oil prices might cause short-term adjustments. However, the longer-term outlook remains positive.

Companies with robust fundamentals, stable cash flows, and resilience under macroeconomic pressures will be more appealing to investors. Additionally, valuations are expected to remain reasonable, encouraging participation from both institutional and retail investors.

Challenges ahead

Despite the positive outlook, challenges persist. Market volatility, high valuations in certain segments, and inflationary pressures could test investor confidence. Companies aiming to raise capital must strike a balance between pricing their IPOs attractively and meeting their capital-raising goals.

A quick guide to expected outcomes

Conclusion

India’s IPO market has a strong growth trajectory, and 2025 is expected to surpass 2024 in terms of both the number and size of public issues. As an investor, focusing on companies with sound financials and realistic valuations will help you confidently ride the IPO wave.