IPO Boom Losing Steam: Unpacking Low Subscriptions and Underwhelming Listings

The IPO market, once a hub of excitement and sky-high demand, is losing its spark. Take November, for instance—big names like Afcons Infrastructure (2.6x), Sagility India (3.2x), Swiggy (3.6x), ACME Solar Holdings (2.8x), and Niva Bupa Health Insurance (1.8x) all struggled to draw significant bids. 

None of them hit more than 4x subscriptions, which is a clear sign of cooling investor interest. To make matters worse, several recent IPO listings have underperformed, showing just how cautious investors have become.

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What’s behind this dip? Experts say it’s largely due to shaky market sentiment, both at home and abroad. Economic uncertainty has taken a toll. Not long ago, IPOs would sell out in hours, fueled by eager retail and non-institutional investors. But since October 2024, this pattern has noticeably shifted.

Compare today’s numbers to earlier in the year when IPOs like Waaree Energies (76.3x), Diffusion Engineers (114.5x), KRN Heat Exchanger and Refrigeration (214.4x), Manba Finance (224.1x), and Gala Precision Engineering (201.4x) were smashing records with massive oversubscriptions. 

Those heady days seem far away now. Looking ahead, upcoming IPOs from Zinka Logistics, NTPC Green Energy, Enviro Infra Engineers, and Avanse Financial Services will serve as a barometer for whether the market can bounce back or if this slump will continue.

Arun Kejriwal, who heads Kejriwal Research and Investment Services, pointed out that when we analyse the last five to ten IPOs, there has been a noticeable decline in subscription levels, as well as a decrease in the returns from IPOs, whether they are negative or only slightly positive. The reality is that the percentage returns have shrunk to their lowest point. Previously, we would see early subscription from retail investors leading to oversubscription right on the first day; now, that is not the case on day one, day two, or even day three, as they are not fully subscribed. 

This change is due to the fact that, earlier, getting allotment was rare, but now it is more common, and often, there is no good return on the investment. The grey market premiums that once thrived at 30%, 40%, or even 50% of the issue price are currently struggling at around 10%. Consequently, investors are becoming doubtful about whether the minimal potential gains justify making an investment or if they should stay away. All of these factors have contributed to a sense of fatigue within the IPO segment, leading to hesitation in applying for them.

Prashanth Tapse, Senior VP at Mehta Equities, explained that primary market action depends on secondary market performance because the secondary market provides high liquidity to investors to participate in the primary market. Ongoing market turbulence is giving a feverish feeling to the primary market, which is witnessing the fever of lower-than-expected demand and subscriptions from almost all types of investors, followed by poor listing due to the downtrend scenario in the secondary market. 

The performance of the secondary market is impacting the primary market papers. Other factors are also fuelling this fatigue in the IPO market such as continued selling pressure from foreign institutional investors (FII’s) followed by disappointed Q2 earnings that have surprised the markets.