IPOs in FY26: From Easy Gains to Tough Questions
For a few years, IPOs in India felt like the closest thing to a “sure shot” in the markets. Many new listings opened at strong premiums, investors boasted of quick double-digit gains on listing day, and companies rushed to tap the primary market.
FY26 looks very different. According to recent analyses of India’s primary market, around 66 percent of IPOs listed over the past year are now trading below their issue price, meaning two out of three listings have eroded investor capital instead of creating it. Nearly 15 companies are down at least 50 percent, with some stocks losing as much as 70 percent of their value versus the offer price.
This sharp contrast with the recent IPO boom has forced a reality check. Investors who treated IPOs as an easy trade are now rethinking their approach, while companies are discovering that markets have become more demanding on pricing and quality.
What’s Happening in FY26? The Numbers Behind the Pain
2 out of 3 IPOs now in loss
Coverage in business media and primary market trackers paints a sobering picture:
- Around 66 percent of IPOs listed over the last 12 months are trading below their issue prices.
- Approximately 15 stocks are down more than 50 percent from their issue price, with several names down 70 percent or more.
- The damage is especially pronounced in midcap and smallcap issues, where aggressive valuations met a sharp risk-off shift over the past 12–18 months.
Examples cited in recent analyses include smaller names such as Glottis, VMT TMT, Mangal Electrical, Jinkushal Industries and Shree Ram Twistex, where post-listing drawdowns have been severe, even though these individual stocks may not be widely tracked by mainstream indices.
Record fund-raising, weak outcomes
Paradoxically, FY26 has still been a busy year in terms of fund-raising:
- India has seen record or near-record IPO mobilisation, with estimates suggesting roughly ₹1.7–1.8 lakh crore raised through more than 100 mainboard issues plus a few hundred SME listings.
- Yet, a large chunk of this fund-raising has not translated into successful secondary-market performance, as many issues were priced aggressively amid strong sentiment and are now being repriced lower.
The headline fund-raising numbers therefore mask a deeper problem: post-listing returns have become highly skewed, with more losers than winners.
Secondary Supply Glut: When the Market Is Too Crowded
₹4 lakh crore of secondary share sales
One of the biggest structural factors weighing on IPOs in FY26 is the surge in secondary market supply.
Reports from Moneycontrol and other outlets, drawing on Prime Database numbers, show that secondary share sales—block deals, promoter stake sales, offer-for-sale (OFS) windows and private equity exits—have touched ₹2.9–3.0 lakh crore in the first eight months of FY26 alone, with overall FY26 secondary supply estimated at around ₹4 lakh crore.
This has three important consequences:
- Investor attention is finite
When large amounts of already-listed stock are hitting the market, investors and institutions often prefer familiar names where performance and governance are well-known. - Liquidity gets absorbed
Secondary deals soak up liquidity that might otherwise have gone into new IPOs. Even with strong domestic inflows from mutual funds and retail investors, there is only so much risk capital to go around. - Pricing power shifts
With so many alternatives in the secondary market—often at more reasonable valuations—new issuers have less room to demand aggressive pricing without leaving something on the table for investors.
Investors favour established names over new stories
Given a choice between a richly valued, untested IPO and a well-known listed company available at a reasonable price after a correction, many investors are choosing the latter. This shift towards quality and familiarity is visible in the way institutional flows have favoured large, liquid names versus more speculative smallcaps.
Geopolitics, Crude and Risk-Off Sentiment
West Asia tensions and crude oil
FY26 is also playing out against a backdrop of elevated geopolitical risk, especially in West Asia. Concerns around conflict and instability in the Middle East have pushed up crude oil prices, which in turn feed into India’s import bill, inflation and currency pressures.
For markets, this has three knock-on effects:
- Higher crude means tighter profit margins for energy-intensive sectors and some downstream companies.
- A weaker or more volatile rupee can make foreign investors cautious.
- Inflation and growth concerns raise questions about how long domestic demand can stay buoyant.
Risk-off behaviour hurts new listings most
When risk appetite declines, the first casualties are typically riskier segments of the market: smallcaps, recent IPOs, and companies without long track records. That is precisely where a large share of the FY26 IPO pipeline has been concentrated, leading to larger drawdowns and lower participation.
Global uncertainties—from war risks to shifting interest-rate expectations—have therefore amplified the domestic problems of over-supply and stretched valuations.
Global IPO Market: Fewer Deals, Bigger Cheques
Q1 2026: Lowest number of deals in years
The slowdown is not just an Indian story. Global IPO statistics compiled by international law firms and advisory houses show that IPO volumes have cooled even as a few large issues keep proceeds elevated.
Industry commentary for early 2026 points to trends such as:
- The number of IPOs in Q1 2026 dropping to the lowest level in roughly six years, with some estimates indicating a year-on-year fall of around 20–25 percent in deal count.
- At the same time, total proceeds have risen, driven by a handful of large, high-profile deals (above the equivalent of $500 million), particularly in select markets like China.
This pattern—fewer but larger deals—indicates that only well-prepared, sizeable issuers with strong stories are able to come to market in a tougher environment.
Regional divergence
Global data also shows regional divergence:
- The US has seen a sizable drop in deal count for traditional and SPAC-style IPOs, with one dataset suggesting declines of roughly 40–50 percent from earlier peaks.
- Europe has stabilized somewhat but is still below past highs, with a single strong quarter masking variability across countries.
- China and some Asian markets have seen pockets of strength, with policy support and local investor appetite driving selective issuance.
Against this global backdrop, India’s own IPO slowdown fits the pattern: sentiment is more discerning, and the bar for new listings has been raised.
What This Phase Means for Investors
The “easy money” phase is over—for now
During the IPO boom, many retail investors approached new issues with a trading mindset: apply, hope for allotment, sell on listing day for a quick profit. That strategy worked—until it didn’t.
With two-thirds of recent IPOs now below issue price, the data sends a clear message: IPOs are no longer a low-risk shortcut to high returns. Valuations that looked justified in a liquidity-driven rally are being reassessed as markets normalize.
Weakening subscription and grey market signals
There are visible behavioural changes:
- Subscription levels: The frenzied multiple oversubscriptions seen in earlier years have faded. Many recent deals have seen more modest or selective demand, especially in the retail and HNI categories.
- Grey market premiums (GMPs): Unofficial GMPs, which once indicated strong listing expectations, are now frequently muted or even negative, suggesting caution before listing.
Even IPOs that saw healthy initial demand are sometimes delivering weak post-listing performance, which further reinforces the shift from momentum-chasing to fundamentals-based investing.
Rethinking the IPO playbook
For investors, this environment calls for a more research-driven, selective approach:
- Treat the red herring prospectus (RHP) not as a formality but as a key document to understand the company’s business model, risks, and valuation.
- Compare IPO valuations with listed peers on metrics like P/E, EV/EBITDA and growth prospects.
- Consider the use of proceeds: how much is fresh capital going into the business versus promoter/PE exits.
- Be realistic about your own time horizon—are you investing for listing gains or for multi-year compounding?
Lessons for Long-Term Investors
1. IPO is an entry route, not a guarantee
An IPO is simply a mechanism for a company to sell shares to the public. It does not guarantee returns. Over the long term, what matters is:
- The quality of the business.
- The price you pay relative to its fundamentals.
- The time you stay invested.
Investors who bought robust businesses at sensible valuations—whether via IPO or secondary market—have historically done better than those who chased hot offers at any price.
2. Valuation and quality trump hype
FY26’s experience underscores a timeless principle: valuation matters. If an IPO is priced assuming best-case growth and sentiment, any disappointment—on earnings, macro or liquidity—can lead to sharp derating.
Conversely, selectively participating in reasonably priced issues, especially where the company has strong cash flows, clear competitive advantages and a healthy balance sheet, can still create wealth over time.
3. Balance primary and secondary opportunities
Instead of treating IPOs as the main gateway to opportunities, investors can:
- Use IPOs selectively where the risk-reward looks favourable.
- Use the secondary market to build positions in established companies that may temporarily be out of favour or fairly valued.
This blended approach helps avoid concentration risk in recent listings and adds stability to portfolios.
What’s Next for the IPO Market? Cyclical Pause or Structural Shift?
Analysts see a cyclical correction
Analysts quoted in The Economic Times and other outlets largely view the current phase as a cyclical correction, not a permanent collapse of the IPO opportunity.
Key elements of this cycle include:
- A post-boom cool-off after years of abundant liquidity and aggressive risk-taking.
- A valuation reset, particularly in midcap and smallcap IPOs that were priced at steep multiples.
- A shift in bargaining power from issuers to investors, with book-runners needing to leave more on the table.
Companies with approvals in hand are choosing to delay their IPOs rather than test jittery markets, leading to a moderated near-term pipeline.
Bankers still optimistic about the medium term
Despite the near-term slowdown, investment bankers and market veterans remain broadly optimistic:
- India’s structural growth story, domestic savings pool, and retail participation remain strong.
- The global spotlight on India as a key capital-market destination continues, even if issuance is more selective.
- As geopolitical tensions ease, inflation stabilises and valuations become more reasonable, IPO activity is likely to pick up again, albeit with a stronger focus on quality.
The next phase of the IPO cycle is expected to be more measured—fewer speculative stories, more emphasis on sustainable business models, and a healthier balance between company funding needs and investor returns.
How Should Investors Approach IPOs After FY26?
If FY26 has dented your confidence in IPOs, that may not be a bad thing—overconfidence is often the enemy of good investing. A more grounded approach could look like this:
- Clarify your objective
Are you applying for listing gains or long-term ownership? Your evaluation framework should match your goal. - Evaluate fundamentals, not just buzz
Focus on business quality, competitive edge, governance and industry structure. - Benchmark valuations
Compare IPO pricing with listed peers; avoid issues that demand a steep premium without clear justification. - Watch market context
In risk-off phases, even decent IPOs can list weakly. It may sometimes be smarter to wait and buy post-listing once price discovery settles. - Stay diversified
Avoid over-allocating to recent IPOs or a single hot sector. A diversified portfolio across market caps, sectors and geographies is more resilient. - Be patient
Just as the boom phase eventually cooled, the current cautious phase will also evolve. There will be future windows with healthier risk-reward.
Disclaimer
This article is for informational and educational purposes only and does not constitute financial, investment, tax, or legal advice. The statistics, examples, and market views cited are based on publicly available reports and media coverage as of early FY26 and may change with new data or developments. Investing in IPOs and equities involves risk, including possible loss of capital. Readers should evaluate their own risk appetite, conduct independent research, and consult qualified financial professionals before making investment decisions. References to specific companies, IPOs, or intermediaries are illustrative and do not represent recommendations or endorsements.
