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The Numbers That Define a Historic Run
I work in markets professionally, and even I find the pace of India’s IPO market over the past few years remarkable. FY2024 saw India raise over Rs 67,000 crore through mainboard IPOs, with more than 75 companies listing on the NSE and BSE mainboard. Add the SME platform numbers and the tally crosses 200 companies in a single financial year. For context, India averaged roughly 30-40 mainboard IPOs per year through most of the previous decade.
Subscription numbers have been equally striking. Several IPOs have seen retail oversubscription of 50-100 times. QIB tranches filling in minutes. Grey market premiums of 40-80% being quoted days before listing. For someone who has watched Indian primary markets for years, it genuinely feels like a structural shift, not just a cyclical sugar rush. But shifts like this always have multiple drivers, and not all of them are equally healthy for the long-term investor.
Let me walk through what is actually powering this boom, who is benefiting from it, and what retail investors should keep in mind when a shiny new IPO appears in their inbox.
Driver One: The Demat Account Explosion
India crossed 150 million demat accounts in 2024. In 2019, the number was around 35 million. That four-fold expansion in five years is extraordinary and has no real parallel in modern financial history for a single country.
This matters enormously for IPO demand because every IPO has a retail quota, typically 35% of the issue size reserved for retail investors applying below Rs 2 lakh. More demat accounts means more eligible applicants, which mechanically inflates subscription numbers even if individual allocation probability falls. But it also represents genuine expansion of the investor base: tens of millions of first-generation equity investors who came into markets post-2020 and view IPOs as an accessible entry point.
This demographic is young (median age of new demat account holders is reportedly in the late 20s to mid-30s), digital-first, and accustomed to UPI-based investing. The UPI ASBA mechanism, which allowed IPO applications directly from bank accounts without blocking funds until allotment, dramatically lowered friction and is itself a meaningful reason for participation growth. Mobile-based applications that complete in under two minutes changed the activation energy required to apply.
Driver Two: SIP Inflows Creating a Structural Demand Pool
Monthly SIP inflows crossed Rs 21,000 crore in 2024. Mutual funds collectively manage over Rs 60 lakh crore in assets. This is not just a large number: it represents a steady, non-discretionary demand for equity that shows up every month regardless of market conditions.
For an IPO, having a deep and liquid institutional investor base that must deploy capital monthly changes the pricing dynamic. Fund managers who are benchmarked to indices need to hold stocks that are or will be part of those indices. Large IPOs that are index-inclusion candidates attract mandatory interest from passive and index-hugging funds. Even before listing, sophisticated institutional investors are making allocation decisions partly based on where a stock fits in their benchmark universe.
This structural demand has encouraged companies to pursue larger issue sizes and more aggressive valuations, knowing there is a willing institutional buyer pool on the other side. It has also shortened the window between a company achieving maturity and choosing to list, because the cost of waiting (in terms of foregone valuation) is lower when the market is consistently absorbing supply.
Driver Three: PE and VC Needing Exit Routes
India’s startup and private equity ecosystem has grown dramatically over the past decade. Between 2015 and 2022, India attracted over $150 billion in private capital across venture, growth equity, and buyout funds. Much of this capital has a ten-year fund life, meaning the 2015-2018 vintage funds are now well into their exit window.
The IPO market is the most visible and often most lucrative exit route for PE and VC investors. Secondary sales to strategic buyers or other PE funds are possible but often restricted by valuations or lack of willing buyers at scale. A public listing provides liquidity, price discovery, and an exit mechanism that works across different investor types and lock-in periods.
This is why many of the high-profile IPOs in India’s recent boom have had significant Offer for Sale (OFS) components: existing shareholders, often PE and VC funds, selling their stakes to the public. The OFS brings no fresh capital to the company. The money goes directly to the selling shareholders. This is not inherently bad: investors need exits to recycle capital into new ventures, and that recycling funds the next generation of innovation. But it means the IPO excitement is, in part, early investors taking money off the table from the public markets.
Understanding the ratio of fresh issue (new capital going into the company) versus OFS (existing shareholders exiting) in any IPO is one of the most important pieces of due diligence a retail investor can do. A company raising 80% OFS and 20% fresh issue is primarily giving PE investors an exit, not primarily funding its own growth.
Driver Four: Companies Choosing Public Markets Over Private Capital
Post-2022, global private capital became more expensive and more selective. The era of zero-interest-rate money flowing into loss-making growth companies with abandon ended abruptly. Companies that in 2021 would have raised a Series D or E round at sky-high valuations found the private capital market far less accommodating in 2023 and 2024.
For profitable or near-profitable companies, the public market became relatively more attractive. Indian public market valuations remained elevated even as global private valuations corrected. Companies that could demonstrate a credible path to profitability found willing buyers on the mainboard at valuations that were sometimes superior to what the private market would offer.
This has brought a different quality of company to the market: businesses with genuine operating history, some years of audited financials, and clearer unit economics. Not all recent IPOs fit this description, but the overall quality of the mainboard cohort has improved compared to the 2021 new-age tech IPO wave, which included several companies listing at enormous losses that subsequently saw severe price corrections.
The Quality Spectrum: Growth Capital vs. Promoter Exits
Not all IPOs are created equal, and the boom has brought considerable variation in quality. At one end are companies raising genuine growth capital: the fresh issue proceeds will fund new manufacturing capacity, geographic expansion, working capital for a growing order book, or debt reduction that frees up cash flows. These IPOs are genuinely putting public money to work in the business.
At the other end are companies where the IPO is primarily a mechanism for promoters and early investors to monetize. The business may be sound, but the listing is an exit event, not a growth event. Retail investors in these cases are essentially buying out people who know the business better than they do, at a price set by those same informed sellers through the book-building process.
In the SME segment, the quality spectrum widens further. The SME platforms have lower listing requirements and have seen both genuine entrepreneurial stories and cases that have attracted regulatory scrutiny for inflated financials, related-party transactions, and manipulated grey market premiums. The SME IPO boom deserves particular caution from retail investors who lack the ability to do deep financial forensics.
The listing premium phenomenon, the grey market premium or GMP that circulates before IPO allotment, has become a self-reinforcing signal that many retail investors rely on too heavily. A high GMP tells you there is speculative demand from those who did not receive allotment wanting to buy on listing day. It does not tell you anything about whether the business is worth the issue price over a three-to-five year horizon.
What a Hot IPO Market Signals About the Broader Economy
A sustained IPO boom is generally a positive signal about economic confidence, capital formation, and the maturity of financial markets. Companies listing publicly creates price discovery, improves corporate governance through disclosure requirements, and gives households a way to participate in corporate growth directly.
India’s IPO market growth also reflects genuine structural change: the formalisation of businesses through GST and digital payments has made more companies IPO-ready because they now have cleaner, auditable financials. The Insolvency and Bankruptcy Code has improved creditor rights, making equity investment relatively safer than it was a decade ago. SEBI’s continuous improvements to IPO disclosure requirements have raised the information quality available to investors.
At the same time, a very hot IPO market is sometimes a late-cycle indicator. When retail demand is so frothy that any issuer can raise capital at high valuations regardless of fundamentals, it often signals that risk appetite has moved from healthy to excessive. Historically, the periods of maximum IPO volume in India, 2007-2008 and 2010-2011, were followed by periods of significant underperformance for IPO investors. The 2021 new-age tech IPO cohort provided a more recent reminder.
For context on how market cycles work in India, the IPO market tends to peak when primary market conditions are most favourable for issuers, which is often when valuations are stretched for buyers.
How Retail Investors Should Approach IPOs
The first thing I tell people is to separate the listing trade from the investment decision. Many retail investors apply to IPOs purely for the listing pop: apply, get allotment, sell on day one, book 20-40% gain, repeat. This is a valid strategy in a hot market, but it requires understanding that you are competing in a numbers game where allotment is random in the oversubscribed retail category, and that the strategy stops working when sentiment turns.
If you are thinking about holding an IPO stock for years, the analysis required is identical to buying any other listed stock. Look at the business model, competitive position, management track record, the use of proceeds, the valuation relative to listed peers, and the promoter’s history of treating minority shareholders fairly. An IPO is not a special category: it is just a company that is newly listed and has the additional disadvantage that price discovery is still incomplete.
Read the Draft Red Herring Prospectus, specifically the Risk Factors section. Companies are legally required to disclose every material risk they can identify. This section is written by lawyers to be exhaustive and is deliberately dense, but reading even the headers gives you a sense of what the company considers its own vulnerabilities. Most retail investors never open the DRHP.
Pay attention to valuations relative to the sector. A company listing at 80 times earnings in a sector where listed peers trade at 30 times is asking you to pay a significant premium for being new. Sometimes that premium is justified by faster growth, but often it is not. The book-building process sets the price based on institutional demand, which is sophisticated but not infallible, particularly when capital is plentiful and institutions are under pressure to deploy.
This connects to the broader question of how to evaluate whether a stock is fairly valued before committing capital.
Finally, position sizing matters. Even the most compelling IPO should not represent an outsized position in a retail portfolio. The information asymmetry between the issuer and the public investor is highest at the IPO stage. Promoters and PE investors have years of experience running the business and chose this specific market window to sell. That should engender some humility about sizing.
India’s primary market growth reflects something genuinely positive: a maturing capital market, a broadening investor base, and an economy that is producing enough investable businesses to sustain this pace. But every wave of enthusiasm in financial markets eventually normalises, and the investors who do best through full cycles are those who maintained discipline on quality and price even when the crowd was euphoric.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Please consult a SEBI-registered advisor before making investment decisions.