Indian IPO Market Sees Record Fundraising, But Most Companies Underperform

The performance of the initial public offering (IPO) market has been one of the talking points in FY26, as 108 firms raised an all-time high amount of 1.75 lakh crore. However, their performance have not been quite spectacular. A total of 71 or 65.5% companies’ share prices are trading below their IPO prices currently, according to data from Prime Database. Importantly, over 50% or 38% of these 71 companies had listing day gains. Industry experts believe that the buoyancy in the IPO market had led to many companies seeking high valuations, leading to corrections post listing. As Rajesh Palviya, head of research at Axis Securities pointed out, 40 of these stocks fell below their issue price on the first day of their listing – a clear indicator mispricing at issuance. Besides elevated valuations amid peak market sentiment, he added that the pricing was based on optimistic earnings projections. Retail investor participation was heavily influenced by grey market premium (GMP) signals, often at the expense of fundamental analysis. Rahul Arora, head of research, Ashika Institutional Equities added that besides the mispricing, the liquidity issues in mid and small cap segments (which most of these companies belong to) played a big role in the underperformance. He explained that a substantial investment in anchor book of IPOs is made by pooled investment vehicles catering to the DIIs as it guarantees allotment. Palviya also added that as broader mid- and small-cap segments declined over the year, with the downside going as low as -68% highlights a deeper disconnect in some cases between IPO narratives and fundamental business strength. This divergence, more than short-term price movements, signals a key risk investors should watch in the future. Pranav Haldea, managing director, Prime Database Group said that IPOs are not independent of the broader market and while there is genuine price discovery by variety of investors during initial trading in secondary market following the IPO but following that, newly listed companies trade like any other stock whose prices vary according to movements in the company, sector, broader market and the economy. Arora also said that such situation do arise during market corrections, as issues related to their valuation, cash flow and ROE (return of equity) growth which were ignored during a bull market came to the fore, leading to a sell-off. This sell-off combined with lack of liquidity lead to a substantial correction in their prices. He added that a lot of these IPOs may never rise to their IPO prices due to this investment-sell-off cycle. The war in West Asia and volatility has also impacted the number of IPOs and in particular, average listing gains, which have dropped from 11.66% in Q2FY26 to -6.08% in March 2026.