Who’s afraid of the IPO market?

Policymakers should only worry about disclosure

- AJAY SHAH

There is anger in the air regarding the Indian IPO (initial public offering) market. The recent data shows that listing gains have declined. A significant proportion of companies listed in 2025 are trading below their issue price. Retail investors who flocked to these offerings in search of quick returns are disappointed. Commentators are using words like “trap”, “loot”, and “pump and dump”. There are calls for the Securities and Exchange Board of India (Sebi), the regulator, to step in and check valuations.

This creates a dangerous moment for policy. When the noise level rises, the desire to manage the headlines and the narrative creates pressure for the government to “do something”. This usually leads to bad regulation, which stifles market development. The Union finance ministry and regulatory leadership need to keep a cool head and look at the long-term data. The Indian IPO market is not broken. In fact, for the first time in history, it is functioning properly.

To understand the health of the primary market, we must look beyond the price movements of the last three months. We must look at the volume of issuance over the last two decades. Traditionally, India has suffered from a volatile “boom-bust” pattern in primary markets. We would have one euphoric year followed by three years of drought. This unreliability harms the creation of new firms.

I have a thumb-rule for a healthy market: It is a good year when there are 36 or more mainboard IPOs.

This averages out to about three per month. When the IPO market purrs away at this rhythm, it signals a functioning pipeline where unlisted firms can reliably do an IPO. We have rarely achieved this. From 2012 to 2020, we hit this benchmark in only one year: 2017. The rest of the time the market was sputtering.