The Roaring IPO Market: What to Expect in 2025
After an unprecedented fundraising spree via initial public offerings (IPOs) in 2024, the primary markets are poised for another robust year in 2025. Following a slowdown in 2023, the resurgence of IPO activity signals a renewed investor appetite and a favorable economic environment. As businesses adapt to evolving market dynamics and investor expectations, the stage is set for a vibrant IPO landscape in the coming year.
A Transformative Year Ahead
As companies embrace transformation and implement new strategies to align with shifting investor demands, the primary markets are expected to remain exceptionally active in 2025. The influx of liquidity in secondary markets is enticing many firms to consider going public, further fueling the IPO momentum. Investors are emerging from the uncertainties surrounding recent elections, showing a growing willingness to allocate capital toward new listings.
Gaurav Sood, managing director and head of equity capital markets at Avendus Capital, notes that the demand for fundamentally sound companies with a strong track record of corporate governance is robust. With market liquidity at an all-time high, larger IPOs are anticipated as investors seek new avenues for capital deployment.
A Strong Pipeline of IPOs
Currently, 29 companies have received approval from the Securities and Exchange Board of India (SEBI) to raise a cumulative ₹46,250 crore through IPOs. Additionally, another ₹1.18 lakh crore worth of IPOs are awaiting regulatory approval, indicating a strong pipeline for the upcoming year. This trend is further bolstered by a network of entrepreneurs supported by marquee private investors, as well as a growing preference among strategic investors to view IPOs as viable exit strategies.
Sood emphasizes that the combination of liquidity, premium valuations, and strong investor demand is driving global parent companies of Indian subsidiaries to consider India as a preferred listing destination. The practice of redomiciling is also gaining traction, allowing companies to unlock value and benefit from India’s rapidly growing market.
Record-Breaking 2024
The year 2024 witnessed a record-breaking ₹1.60 lakh crore raised through IPOs, with 91 companies going public—more than double the ₹49,436 crore raised in 2023. This surge surpassed the previous record of ₹1.18 lakh crore raised in 2021. The Indian markets demonstrated remarkable resilience amid global economic challenges, showcasing a diverse range of sectors participating in the IPO boom.
Notably, Hyundai Motor India’s IPO became the largest of the year, raising ₹27,858 crore, surpassing previous records. The National Stock Exchange (NSE) led in primary listings by value, outpacing global counterparts such as Nasdaq and the Hong Kong Stock Exchange.
Key Sectors to Watch in 2025
Looking ahead, several sectors are expected to attract significant investor interest through IPOs. Manufacturing, renewable energy, healthcare, and new-age consumer technology are poised for growth, driven by strong macroeconomic tailwinds. Sood highlights that many upcoming IPOs are likely to be driven by private equity exits or sponsor-driven sales, reflecting a growing trend in the market.
Abhimanyu Bhattacharya, partner at Khaitan & Co, identifies technology and digital services, renewable energy, telecommunications, financial services, and electric vehicles as key sectors to watch. The government’s initiatives, such as ‘Make in India,’ are expected to further boost fundraising activities, particularly in the manufacturing and industrial sectors.
Navigating Valuation Concerns
Despite the excitement surrounding IPOs, concerns about steep valuations persist. In 2024, 24 companies were listed with a billion-dollar market capitalization, reflecting an 85 percent increase over 2023. However, this remains below the peak of 26 companies in 2021. Investors are urged to evaluate IPOs based on fundamentals and growth potential rather than short-term market sentiments.
Sood warns that overpricing can lead to negative investor reactions, even for well-established companies. As a result, price discovery during the IPO phase has become a closely monitored process, with companies striving to create strong value opportunities for investors.
The SME IPO Surge
The small and medium-sized enterprises (SME) segment also experienced a gold rush, raising a record ₹8,760 crore through 240 IPOs in 2024. This surge in SME IPOs has prompted SEBI to tighten regulations to protect investors. New mandates limit the offer for sale by promoters in SME IPOs and raise the minimum net-worth requirements for merchant bankers and custodians.
Bhattacharya supports these regulatory changes, emphasizing the importance of safeguarding investors and ensuring that only financially sound SMEs can access capital markets. Enhanced transparency and reduced risk of market manipulation are crucial as the SME segment continues to grow.
Conclusion
As we look forward to 2025, the Indian IPO market is set to maintain its momentum, driven by a combination of strong investor demand, favorable economic conditions, and a diverse range of sectors poised for growth. While challenges such as global economic uncertainties and domestic policy changes may arise, the overall outlook remains optimistic. Investors and companies alike should remain vigilant, focusing on fundamentals and long-term potential as they navigate this dynamic landscape.