India's IPO market is witnessing unprecedented participation from retail investors in 2025, driven by a powerful combination of domestic liquidity, digital platforms, and the allure of quick returns. According to Atul Shinghal, Founder and CEO of Scripbox, this trend reflects growing confidence in the economy and stable government policies.
What's Fueling the IPO Frenzy?
Retail investors are flocking to initial public offerings due to multiple favorable factors. The availability of abundant domestic capital combined with easy access through emerging digital investment platforms has created perfect conditions for widespread participation. The sustained government stability and broad economic optimism have significantly strengthened investor confidence in new issues.
Recent mainboard IPOs demonstrate this trend clearly. Sudeep Pharma Ltd. attracted retail subscription of 15.65 times, while Excelsoft Technologies Ltd. and Capillary Technologies India Ltd. saw retail multiples of 16.44 times and 15.85 times respectively. However, institutional investors continue to dominate subscription levels, with Sudeep Pharma showing QIB subscription exceeding 213 times.
The diversity of sectors entering the IPO market has broadened appeal across investor segments. Companies from technology, healthcare, manufacturing, and consumer services are creating a robust pipeline that caters to varied investment preferences.
Risks of Chasing Listing Gains
Shinghal emphasizes that investing solely for listing gains is a precarious strategy with significant risks. Data from the last three months shows mixed performance, with the median listing gain at just 2%. This indicates that applying randomly to all IPOs would not yield substantial returns.
The Scripbox analysis of the last 24 IPOs reveals that while some companies like LG Electronics and PhysicsWalla delivered strong listing gains, others registered losses. Relying on listing pops assumes favorable market sentiment and optimal pricing, both of which are difficult to predict consistently.
Major risks identified include overpaying due to hype, promoter exits disguised as IPOs through high secondary share sales, market volatility causing sharp corrections, and reduced liquidity affecting aftermarket price stability.
Smart IPO Investment Strategy
Before investing in any IPO, Shinghal recommends a comprehensive evaluation covering several critical aspects. Business fundamentals including profitability, growth prospects, and competitive positioning should be thoroughly assessed. Promoter credibility and intentions are equally important, especially examining the proportion of fresh issue versus secondary sales.
Pricing relative to peers and historical trends must be carefully analyzed to avoid overpriced issues. Subscription data across institutional, HNI, and retail segments provides valuable insights. For instance, disproportionate institutional oversubscription with weak retail response may indicate pricing concerns.
Recent successful IPOs like Tenneco Clean Air India Ltd., which saw QIB subscription of 174.78 times and delivered +27.2% listing return, demonstrate the importance of balanced demand across investor categories.
SME IPO Approach and Multibagger Potential
Investing in SME IPOs requires additional caution due to smaller company sizes, lower liquidity, and higher volatility. Shinghal suggests focusing on sound financial performance, transparent governance, and clear growth drivers. Avoiding issues driven predominantly by oversubscription hype or excessive promoter exits is crucial.
Potential multibaggers in the SME segment typically exhibit consistent profitability, minimal promoter dilution, and operate in sectors with strong growth tailwinds. However, caution remains essential as many SME IPOs have delivered highly volatile or negative returns post-listing.
The evolving behavior of Indian retail investors shows increasing sophistication, with more investors now factoring in broker analysis and subscription data. While speculative tendencies persist, there's evidence of growing discernment in investment decisions.
Shinghal concludes that IPOs should represent a small, well-considered allocation within a diversified investment portfolio rather than forming the core holding. Long-term wealth building demands focus on quality companies with demonstrated growth track records, reasonable valuations, and patience to withstand short-term volatility.
