The Indian primary market is experiencing an unprecedented boom, with a flurry of companies rushing to go public. The year 2025 has emerged as one of the most active periods for new listings in over a decade, with nearly 90 companies raising a staggering over ₹1.51 trillion from investors.
The Allure and The Reality of IPO Investing
Every few weeks, a new initial public offering (IPO) captures headlines, triggering a frenzy among retail investors hoping to secure quick profits on listing day. However, the glitter of these public debuts often hides a less glamorous truth. Market data reveals a sobering statistic: nearly 40% of the IPOs that listed between 2021 and 2025 are currently trading below their issue price. This means that four out of every ten investors who held onto their allotments are now sitting on losses.
The short-term 'listing pop,' once a near-guarantee, is also fading. In 2025 alone, 12 IPOs made their market debut below the issue price, while another 31 provided meagre gains of just 0-10%, far from the jackpot that many applicants anticipate.
The Hidden Trend: Promoters Cashing Out
Behind the surge in public offerings lies a critical trend that demands investor attention: a record rise in Offer for Sale (OFS) transactions. In an OFS, promoters and early investors sell their existing shares to the public, rather than the company raising fresh capital for expansion.
The numbers are telling. In 2024, ₹95,285 crore was raised via OFS. The momentum has continued into 2025, with over ₹96,000 crore already raised through this route year-to-date. If this pace continues, 2025 will mark a historic first for India, with OFS volumes crossing the ₹1 trillion mark.
Data since 2015 shows a startling fact: two-thirds (66%) of all IPO proceeds have gone directly to promoters and early investors, not to fund the company's growth. This is crucial for investors to understand because when an IPO is predominantly an OFS, your investment isn't helping the business expand or innovate; it is simply facilitating an exit for existing shareholders.
Mainboard vs SME IPOs: A Critical Distinction
Not all IPOs are created equal. The market is broadly divided into two categories: Mainboard IPOs and SME IPOs.
Mainboard IPOs are typically from large, established companies listed on the major exchanges, NSE and BSE. They are generally more stable, transparent, and better suited for beginner investors.
SME IPOs, on the other hand, are for smaller firms listed on dedicated platforms like NSE EMERGE or BSE SME. While they often attract attention with flashy grey market premiums (GMPs), they carry significantly higher risks. The minimum investment is typically above ₹1 lakh, and these stocks suffer from limited liquidity, making it difficult to find buyers after listing.
The 'Flipper' Problem and Fading Easy Money
A significant issue plaguing India's IPO market is the rise of 'flippers'—investors who sell their allotted shares immediately after listing to pocket quick gains. Data indicates that a massive 42.7% of retail investors sell their IPO shares within just one week of listing. This short-term behaviour increases market volatility and weakens price stability for long-term investors.
The era of easy money from IPOs, seen during the 2021-2023 boom with stocks like Nykaa and Paras Defence, is fading. As interest rates rose and valuations stretched, reality set in. High-profile listings such as Paytm, CarTrade, and Zomato fell 30-70% from their issue prices post-listing. While some have recovered, these early drops underscore the importance of careful analysis over blind application.
How to Analyse IPOs Smarter
To navigate the current IPO landscape successfully, investors should adopt a data-driven approach. Before applying, take five minutes to check these key parameters:
- Financial Health: Is the company profitable? Has revenue grown consistently over the last 3 years?
- Valuation: Is the asking price fair compared to its listed industry peers?
- Grey Market Premium (GMP): While useful for gauging market sentiment, a high GMP is no longer a guarantee of listing gains.
- Issue Type Breakdown: Critically review how much of the issue is a Fresh Issue (money goes to the company) versus an Offer for Sale (money goes to existing shareholders). IPOs focused on expansion, like EMS Ltd (2023), often perform better than pure exit stories like Tata Technologies (2023).
The IPO market still offers rewarding opportunities, but success now hinges on informed decisions backed by data, not luck or hype. By focusing on companies with solid earnings, clear growth plans, and a genuine need for capital, investors can separate the true growth stories from the mere exit strategies.
