Investor interest in India's primary market remains resilient despite recent volatility, though participants are becoming more selective about where they deploy capital. In an interaction with Business Today, Ravi Singh, Chief Research Officer at Mastertrust, shared his views on the IPO pipeline, valuation trends, retail participation and the sectors likely to dominate new listings in the coming months.
Here are the edited excerpts from the interview:
Q) Do you believe investor appetite for new listings remains intact, or could market uncertainty slow the pace of upcoming IPOs?
Despite the recent volatility, India's IPO pipeline remains quite strong. The appetite among investors hasn’t disappeared — it has simply become more selective. Investors are no longer rushing to subscribe to every issue that comes to the market. Instead, they are paying closer attention to business quality and earnings visibility. Companies with solid fundamentals and clear growth visibility are still attracting strong subscriptions, while weaker businesses are struggling to generate interest or are seeing muted listing gains. The broader drivers supporting IPO demand remain intact — steady SIP inflows, a rising number of retail investors through demat accounts, and confidence in India’s long-term economic growth.
Market volatility may create temporary caution, but it does not fundamentally weaken the IPO market. In fact, it often acts as a filter that separates strong businesses from opportunistic listings. Going forward, the IPO pipeline is likely to stay active, though investors may continue to be more disciplined and selective while subscribing.
Q) We have seen several IPOs listing at modest premiums recently. Do you think valuations in the primary market are getting stretched?
In certain areas, IPO valuations do appear stretched. Over the past few years, several companies have come to the market seeking premium valuations based largely on future growth expectations, even when their current profitability remains limited. The relatively modest listing gains seen in many recent IPOs suggest that investors are beginning to push back against aggressive pricing. Promoters and investment bankers are gradually realizing that pricing an issue too aggressively can backfire. If investors see no room for post-listing gains, enthusiasm tends to fade, and that can hurt future capital raising plans as well.
The SME IPO space deserves particular attention, as valuations in some cases have moved far ahead of underlying fundamentals. That said, compared to the volatile phase seen during the 2021-22 period, many mainboard IPOs today appear somewhat more reasonably priced. Overall, the market seems to be correcting itself, but investors should still evaluate valuations carefully rather than chasing listing gains.
Q) Retail participation in IPOs has surged in recent years. Do you see this trend sustaining, or could risk appetite fade if markets remain volatile?
Retail participation in the Indian market has changed in a meaningful way over the last few years, and it now appears to be a structural trend rather than a temporary phase. With more than 16 crore demat accounts and the ease of applying through UPI-based platforms, the process of investing in IPOs has become far simpler than before.
However, the nature of participation is likely to evolve. Investors who are mainly chasing quick listing gains may step back when markets become volatile or when IPO performance weakens. On the other hand, the number of retail investors who evaluate businesses more seriously is gradually increasing. The key factor that can influence participation is listing performance. If several IPOs deliver disappointing returns, retail confidence can weaken. But as long as quality companies continue to provide reasonable returns after listing, retail participation is likely to remain strong through different market cycles.
Q) From an investor's perspective, what are the key financial or governance indicators one should examine before subscribing to an IPO?
Before applying for any IPO, investors should focus on a few essential fundamentals. The first is revenue growth consistency. A company showing steady growth over several years is generally more reliable than one with a sudden spike in revenue. Operating cash flow is another critical indicator. If a company reports profits but consistently generates negative cash flow that can signal deeper financial issues. Investors should also examine debt levels carefully, as some companies go public mainly to reduce debt rather than expand their business.
Promoter holding after the IPO is another useful signal. If promoters are significantly reducing their stake, it may raise questions about their long-term commitment. Investors should also review related-party transactions and the use of IPO proceeds. Funds used for expansion and business growth are usually a positive sign, while heavy offer-for-sale components may indicate early investors exiting.
Q) Many companies are coming to the market with high growth but limited profitability. How should investors evaluate such businesses in the IPO space?
Companies that show strong growth but limited profitability are often the most difficult to evaluate. Rapid growth can be attractive, but it should be supported by a clear path toward profitability. Investors should look closely at the company’s unit economics. Even if net profit is currently negative, healthy gross margins can indicate that the core business model is sound. It is also important to understand whether losses are due to heavy investment in growth or because the business model itself struggles to generate sustainable profits. Another key indicator is whether cash burn is gradually declining relative to revenue. If losses continue expanding without any improvement in operating efficiency, that can be a warning sign. Investors should also check whether management has provided a realistic timeline for reaching EBITDA breakeven and whether they have historically met their own guidance.
Q) Looking ahead, which sectors do you expect to dominate India's IPO pipeline over the next 12–18 months?
Several sectors are likely to drive IPO activity in India over the next year or so. Defence and aerospace companies are expected to attract strong interest as the country continues to push for domestic manufacturing and reduced dependence on imports. Renewable energy and the broader electric vehicle (EV) ecosystem are also emerging as important themes. Companies involved in solar, wind, battery technology, and related supply chains are likely to tap the capital markets as the energy transition accelerates.
Specialty chemical companies may continue to witness IPO activity as global supply chains diversify away from China. Financial services companies, including insurance, wealth management firms, and niche NBFCs, are also expected to come to the market. Healthcare and diagnostics businesses remain another area of interest due to rising healthcare awareness. Finally, consumer technology and digital platforms could continue listing as India’s digital consumption story expands.
Specialty chemical companies may continue to witness IPO activity as global supply chains diversify away from China.
