Approvals Nearing Expiry
A wave of Indian initial public offerings (IPOs) is facing the risk that their regulatory approvals will expire in the coming weeks. Companies like EQT AB-backed Credila Financial Services, aiming to raise ₹50 billion ($536 million), along with Dorf-Ketal Chemicals India Ltd., Hero FinCorp Ltd., and Veritas Finance Ltd., find their listing plans threatened by unsettled financial markets. SEBI approvals are typically valid for 18 months, but current market dynamics could force these firms to restart the entire approval process by refiling their draft prospectuses. This would mean significant delays and extra costs.
Valuation Gaps Hinder Listings
The main obstacle to these listings isn't just a market downturn, but a disconnect between what companies expect and what investors are willing to pay. India's IPO market in FY26 has seen a sharp reversal, with about two out of every three mainboard listings trading below their issue price. Data shows 12 of the 18 mainboard IPOs this year are trading below their offer prices, and seven have fallen between 11% and 35%. This underperformance highlights investor skepticism about valuations set when market liquidity and optimism were higher.
Market Woes and Investor Caution
Ongoing geopolitical tensions, particularly in West Asia, along with high crude oil prices and a weakening rupee, have made Indian markets highly volatile. On April 1, 2026, the Indian Rupee hovered around 0.0107571 against the US Dollar, and Brent crude traded near $105.3 per barrel. Despite a market rebound on April 1st, driven by hopes of de-escalation and strong foreign investor inflows, overall market sentiment remained cautious. On April 2nd, while the Sensex and Nifty closed higher, broader indices like the Midcap 100 and Smallcap 100 saw notable declines, showing investor unease. This volatile backdrop, with inflation projected to rise to around 5.1% for FY27, makes investors wary of IPOs priced at a premium.
Examining Specific Cases
Hero FinCorp, despite strong revenue growth, reported an 82.74% profit decline in FY25 and faces ongoing regulatory actions against its promoters. Data from the unlisted market shows Hero FinCorp's shares dropping sharply from over ₹2,000 to around ₹1,040–1,050, signaling a rethink of expectations. Similarly, Veritas Finance, though it achieved unicorn status, plans a substantial Offer for Sale (OFS) component, making up nearly 80% of its ₹2,800 crore issue. Such structures, where existing shareholders seek exits, are becoming a point of contention as investors demand more conservative valuations.
Risks and Refiling Costs
The need to refile prospectuses creates significant financial and time costs, potentially pushing listings into a more uncertain market later this year or even in 2027. Substantial OFS components in proposed IPOs from companies like Veritas Finance (around 80%) and Hero FinCorp (over 40%) show a mismatch between sellers' valuation hopes and buyers' willingness to invest amid higher risk. Hero FinCorp's profit decline and regulatory scrutiny add company-specific risks, unlike peers such as Credila, India's largest education-focused NBFC. The robust pipeline of over 84 companies having SEBI approval and 108 seeking it, collectively aiming to raise over ₹2.6 lakh crore, could face a weak reception if market conditions don't improve, potentially leading to a long pause in IPOs.
Outlook for India's IPO Market
While forecasts suggest India's IPO market could raise $20-$25 billion in 2026, the near-term outlook is clouded by valuation concerns and market volatility. Investment bankers suggest the slowdown is sentiment-driven and could revive with better conditions. However, recent performance, with FY26 IPO returns hitting a multi-year low of -7%, indicates that lower listing profits and more selective investors are likely to define the primary market going forward. Companies might have to accept lower valuations or delay their public debuts until market stability returns.