About a year after an unprecedented IPO rush that raised roughly ₹1.5 lakh crore, roughly half of those newly listed companies are trading below their offer price. The initial euphoria — the listing-day “pop” that made headlines and created quick winners — has faded for many investors. What seemed like a golden era of easy gains has revealed a more sobering lesson: early-day excitement is not the same as long-term value.
What drove the big IPO wave?
Low interest rates, strong retail participation and a hunger for growth stocks pushed a record number of companies to the public markets. Many IPOs were heavily oversubscribed, and listing-day gains became a media spectacle. That environment encouraged companies to seek large valuations and investors to chase momentum, sometimes without a full assessment of fundamentals.
Why listing-day pops can be misleading
- Emotion over fundamentals: Retail frenzy and short-term trading can inflate prices for a few sessions, masking weak business metrics.
- Liquidity-driven moves: A lack of free-floating shares and concentrated demand can create artificial spikes that unwind quickly.
- Marketing vs reality: Hype around a story or sector often outpaces the company’s actual earnings, margins or sustainable growth.
- Valuation disconnect: Companies priced for perfection at listing leave little room for disappointment.
Why many listings are now underwater
Several factors explain why about half the 2024–25 listings are trading below their issue price:
- Tighter macro conditions: Rising rates and slower growth have reset investor expectations across markets.
- Selective weakness: Sectors that underperformed or faced regulatory headwinds pulled down specific IPO cohorts.
- Post-listing realities: Quarterly results, slower-than-expected execution or high cash burn exposed gaps between promise and performance.
- Rotation to quality: After a speculative phase, many investors flowed back to established large caps, leaving smaller new listings to correct.
How investors should approach IPOs now
Listing-day headlines can be tempting, but disciplined selection is more important than ever. Consider these practical steps:
- Focus on fundamentals: Look for consistent revenue growth, healthy margins, clear path to profitability and strong cash flow.
- Check valuation: Compare price-to-earnings, price-to-sales and other metrics with peers — avoid paying for unrealistic growth.
- Understand the business: Know the company’s competitive edge, customer concentration and regulatory risks.
- Plan your time horizon: Treat IPOs as potential long-term investments, not quick flip opportunities.
- Diversify: Don’t let a single listing or a sector dominate your portfolio; spread risk across themes and sizes.
Practical rules for retail investors
- Set a buy price based on valuation, not momentum.
- Limit allocation to any one IPO to avoid outsized exposure.
- Wait for a few quarters of public financials before committing large sums.
Listing-day joy can be real, but it’s often short-lived. The lesson from the ₹1.5 lakh crore wave is clear: disciplined selection, sober valuation checks and a focus on business quality matter far more than chasing the next quick pop. For most investors, patience and skepticism will prove better companions than FOMO.