Record Funds Raised, But Investor Returns Suffer

The Indian stock market has experienced exceptionally high activity, raising a record amount of money and seeing far fewer draft offer documents rejected by the Securities and Exchange Board of India (SEBI). This environment, supported by better regulatory engagement and a more developed IPO market, has driven fundraising to historic highs. Yet, this boom hides a different picture for investors, where market excitement is increasingly disconnected from performance after listing.

Valuation and Listing Performance

In fiscal year 2026 (FY26), companies raised a record ₹1.8 trillion through mainboard IPOs, exceeding the ₹1.62 trillion collected in FY25. This surge in primary market activity, which made India the world's busiest listing destination by deal count in 2025, was aided by SEBI's policy changes. Reforms in September 2025 updated rules on minimum public offers and extended timelines for minimum public shareholding. The broader market's Price-to-Earnings (P/E) ratio for the India SENSEX was around 21.310 as of April 13, 2026, providing a general valuation context.

However, this wave of fundraising has not guaranteed investor profits. Data shows that in FY26, only about one-third of the 109 mainboard IPOs offered positive returns after listing. A closer look reveals that 71 out of 108 mainboard IPOs in FY26 were trading below their issue price by March 2026. The average listing gain dropped to 8% in FY26, a sharp decline from the 30% seen the previous year. By late March 2026, the average return of listed IPOs had turned negative at -7%, with early 2026 showing an average listing gain of -1.9%. This suggests investors are becoming more selective, preferring companies with strong fundamentals and clear plans for using capital, rather than just participating in high-volume offerings.

Confidential Filings Grow

A significant trend shaping the IPO process is the increasing use of confidential filing. Introduced by SEBI in November 2022, this allows companies to submit draft offer documents privately to get regulatory feedback and test market conditions before making them public. This approach helps protect sensitive business details and offers flexibility in timing market debuts. As of March 2026, about 20 firms had used this confidential route since March 2025. While this allows for a more controlled preparation, it can also create blind spots. Less early public scrutiny may lead to limited investor feedback, potentially causing misjudgments in pricing or strategy.

Concerns Over IPO Quality and Investor Disappointment

The current market conditions show a significant gap between the success of companies going public and the outcomes for investors. While SEBI's focus on efficient review rather than just faster clearances aims to build a more mature IPO market, falling listing gains and a growing number of underperforming IPOs raise questions about the quality of offerings. Furthermore, the significant use of Offer for Sale (OFS) components in many IPOs, where proceeds go mainly to existing shareholders instead of funding company growth, reduces the intended capital infusion for expansion. This trend, along with a notable drop in retail investor participation—average applications per IPO fell to 12.87 lakh in FY26 from 21.31 lakh in FY25—indicates growing retail investor fatigue due to disappointing returns. The market's preference for companies with clear earnings and strong balance sheets means more speculative or aggressively priced IPOs face higher risks of underperformance, contributing to the negative average returns seen in early 2026. The complexity from confidential filings also raises questions about long-term transparency and investor protection.

Future Outlook

Despite challenges in post-listing performance, the pipeline for IPOs remains strong. Around 64 companies are awaiting SEBI clearance, and another 124 have approval but haven't launched yet. Overall market sentiment, supported by domestic liquidity and ongoing SEBI reforms aimed at market depth and investor participation, suggests continued activity. However, the focus is likely to increase on investor selectivity. Companies that can clearly present strong business fundamentals, responsible capital use, and realistic valuations are expected to attract interest. In contrast, those relying on hype or aggressive pricing may continue to struggle to deliver meaningful returns in a primary market that is becoming more cautious and selective.