Ajay Garg, founder of Equirus Capital, notes that the Indian IPO market is shifting from speculation to long-term value creation. He highlights how domestic institutional investors are driving better price discipline, reducing the market's dependence on global flows. However, he warns that companies must remain disciplined with valuations to avoid long-term wealth destruction.
The Indian primary market is undergoing a fundamental shift, moving away from a focus on short-term listing gains toward a more mature, value-driven approach. According to Ajay Garg, founder and Managing Director of Equirus Capital, this change is largely powered by a more robust domestic capital base. While foreign investors have historically dictated market sentiment, the current landscape is increasingly anchored by consistent flows from domestic institutional investors, including mutual funds.
The Shift to Domestic Stability
This rise of domestic capital has changed the way IPOs are priced and received. With mutual funds and other domestic institutions deploying billions in capital each month, the primary market now has a steady demand side that is not as easily swayed by global market swings. Garg suggests that this stability fosters better price discipline. Investors have become more active, negotiating harder on valuations and forcing issuers to justify their pricing rather than simply riding a wave of market hype.
Governance and Professionalism
Beyond pricing, there is a visible trend toward professionalizing family-owned businesses. Many promoters are now entering the public markets not only to raise fresh capital but to adopt a market-based governance framework. This transition allows many business families to move from daily operational roles to becoming long-term shareholders. This structure is intended to align the interests of promoters with those of public shareholders, potentially leading to better value creation over the long term.
Managing Market Risks
While the outlook for the IPO market is supported by strong domestic participation, the broader economic environment poses challenges. Garg highlights that India’s balance sheets remain vulnerable to external shocks, particularly commodity price volatility and energy dependency. Because the economy relies heavily on imported energy, inflationary spikes can pressure corporate margins and overall stability.
Investors are also advised to view IPOs through a long-term lens rather than expecting guaranteed returns. While the market is maturing, Garg emphasizes that valuation discipline is crucial. If companies price themselves as 'gold-standard' assets without the underlying business performance to match, it can lead to wealth destruction for investors. The key monitorable for the market will be whether issuers can sustain this discipline as the number of new listings continues to grow, and how these companies navigate broader economic pressures like raw material inflation.