As DIIs dictate valuations, SIP muscle reshapes IPO market

Experts say DIIs are exerting greater discipline on valuations than during the 2021 IPO cycle

- Abhinaba Saha

Domestic institutional investors (DIIs), led by mutual funds (MFs), are emerging as the decisive force in India’s initial public offering (IPO) market, reshaping how new listings are priced. Backed by relentless systematic investment plan (SIP) inflows and deeper participation in anchor books, they are exerting far greater discipline on valuations than during the 2021 IPO cycle, experts said.

Mint's analysis of Tracxn and Venture Intelligence data covering 43 companies shows average IPO premiums over the last private round have shrunk sharply. In 2021, select consumer and tech firms listed at roughly twice their prior valuations on average. By 2025, the average premium had moderated to about 20%, with several high-profile names even listing at discounts.

"DIIs now have a significant voice when it comes to valuations as compared to the 2021 IPO cycle," said Sonia Dasgupta, managing director (MD) and chief executive officer (CEO) of investment banking at JM Financial. Steady SIP inflows, she added, have boosted their influence across anchor books and public markets.

What began as consistent domestic fund flows has transformed into a structural shift in India’s capital markets. Institutional investors now hold the balance of power in IPO pricing: reshaping exit strategies, valuation expectations and the very criteria for going public.