Why are we facing an IPO drought in 2025?

The primary markets have been facing a dry spell in the last few weeks due to prolonged delays in launching initial public offerings (IPOs). Despite 26 companies receiving SEBI approval to raise up to ₹43,000 crore in the first three-quarters of FY2025, many of them have postponed or shelved their IPO launches. The last major mainboard IPO, Quality Power Electrical Equipments, opened for subscription on February 14.

Among the 26 DRHP-approved companies are Schloss Bangalore Ltd (₹5,000 crore), Ather Energy Ltd (₹4,500 crore), NSDL (₹3,000 crore), and Avanse Financial Services Ltd (₹3,500 crore).

The number of new companies filing IPO documents (DRHP) with SEBI has also declined. In January 2025, 29 companies filed DRHP, which is an initial document to be submitted for SEBI approval before launching an IPO. In February 2025, only 14 companies filed DRHP.

This slowdown in primary markets comes after a record fundraising year in 2024 when companies mop-up ₹1.6 lakh crore. The IPO pipeline is getting bigger because of the delay in the new IPO launch.

Why are companies holding off their IPOs?

Experts believe companies are postponing their IPOs, even after receiving regulatory approval, mainly due to prevailing market volatility and lacklustre IPO subscriptions.

Weak market sentiments

Domestic stock markets have taken a hit, with benchmark indices NIFTY50 and SENSEX falling 15.02% and 14.28%, respectively, over the past five months. Weak Q3 earnings seasons, a significant sell-off by foreign portfolio investors (FPIs), and trade war concerns have weakened market sentiments.

According to experts, IPOs perform well when broader markets are doing well as investors' confidence is high, and they subscribe to these public issues in large numbers for listing premiums.

However, recent mainboard IPOs have struggled to list at a premium. For example, Ajax Engineering and Dr Agarwals Healthcare IPOs listed at a discount last month. Meanwhile, the ₹8,750 crore Hexaware Technologies IPO was subscribed 2.79 times, with most of the demand coming from institutional investors, while the retail category was booked only 11%.

As a result, companies are waiting for market conditions to improve before launching their IPOs. After SEBI’s nod, companies typically have one year to launch their IPOs without letting the approval lapse. Meanwhile, some companies may even consider reducing their IPO size or lowering their valuations to attract investors.

What lies ahead for the primary markets?