Highlights
- India’s IPO market raised about $24Bn in 2025, making it one of the strongest global IPO years.
- Domestic mutual funds + SIP inflows (~$3B/month) are now the biggest driver of IPO demand.
- A large share of IPO money is OFS (investor exits) rather than fresh capital for company growth.
- The article says it’s not a full-blown bubble yet, but retail investors should be cautious about valuations.
Private credit has become an increasingly important component of India’s financing landscape, but its role and its value are often misunderstood. A closer look reveals that private credit is not competing with banks on pricing, nor is it attempting to replace the traditional banking system. Instead, it is carving out a distinct position based on flexibility, customisation, and the ability to address complex financial situations that fall outside the scope of standardized lending.
Pricing: Not a battle private credit is fighting
At the heart of this momentum is liquidity. With Systemic Investment Plans (‘SIPs’) pouring in ~US$3bn into equity mutual funds every month, most mutual fund managers are betting big on listings to generate alpha in their portfolios. They have become the biggest market makers in the IPO market. It is a significant shift from a decade ago when foreign institutional investors used to rule the roost. Today, no IPO can be successful without the blessings of the large mutual fund houses. While supply side dynamics have been like this for the past few years, the demand side has seen a structural change with investors banking on IPOs to deliver them the ‘pop’ in a market headed sideways.
Discernment amid Buoyancy
Of course, in moments like these, the age-old phrase ‘caveat emptor’ remains relevant. While buoyancy creates opportunity, it also calls for discernment, specially from retail investors. The first is the quality of the companies going public. Leaving the larger issues aside, investors must look beyond regulatory disclosures to assess management quality, governance standards, track record and business fundamentals. The rise of social media “financial experts” has democratised access to opinions, but not always to reliable insights. Unlike other countries, India has a relatively accessible listing framework, which while enabling deserving mid-scale companies to tap the markets, sometimes results in sub-scale listings with low trading volumes. Rather than a flaw, this is part of a system still maturing, one that will likely self-correct as transparency expectations and investor sophistication continue to rise.
Secondary Sales Surge
The other interesting dynamic in this market is the fact that nearly two-thirds of the capital raised in the past 18 months has been an offer for sale by existing investors. Clearly, they see the current liquidity in the primary markets as a timely opportunity to realign their portfolios and realise value. With several asset-light and low on capex, choosing to go public, there has naturally been a higher proportion of secondary offerings (offers for sale). As many balance sheets today are already deleveraged, the reduced need for primary capital reflects stronger fundamentals and capital efficiency. In such cases, where growth capital requirements are moderate, it becomes even more important for revenue and earnings trajectories to be modelled and priced with precision. This is an area where there is room for greater alignment. Some stocks have faced pressure post-listing, reminding investors that the IPO is a starting line, not the finish.
Burst Risk and Market Discipline
So, are we headed for a bubble? Probably not. A significant difference between today and previous market euphorias is the presence of far more informed and assertive institutional investors. Several high-quality issuances have been paused due to price pushbacks - an encouraging sign that valuation frameworks are being respected. It reinforces the fact that this is an open market with room for multiple perspectives, where each investor must align decisions to their own risk-reward appetite.
Looking ahead, outlook remains optimistic. As depth (in terms of trading volumes) and the breadth (in terms of diversity of sectors and scale) expand India’s markets are poised for greater domestic participation where direct equity exposure is still ~2.1% of household savings, indicating immense headroom. Institutional funds too will benefit from a wider swathe of companies to choose from and will get the flexibility to customise investment products according to scale and industry. Given the liquidity dynamics and stable macro-economic conditions, it is quite likely that 2026 will be another record year for public listings. With the benefit of having a very vigilant regulator overseeing the markets, Indian investors can benefit from a decadal opportunity to gain exposure to some of the best names that India Inc has to offer.
