The IPO market has been buzzing with action. The last few months saw record number of new issuances including marquee names like Tata Capital and LG Electronics India. Long seen as a barometer of investor optimism, there appears to be some silent shifts across the IPO market. According to Sanjeev Prasad, MD & Co-Head, Kotak Institutional Equities, while India’s primary market remains active on the surface, the quality of issuances and the intent behind them are beginning to shift. The detailed report by Kotak Institutional Equities noted that fund use for new projects is seeing a decline and more IPOs are now trading below issue price, even as a large pipeline keeps sentiment upbeat.
Kotak’s data show that 80 companies have raised around $14 billion, nearly Rs 1.17 lakh crore in 2025 so far, compared to 91 companies that mobilised Rs 1.59 lakh crore in 2024. The numbers still look large, but both in terms of count and size, there seems to be a moderation, even as the retail frenzy around IPOs remains visibly high.
IPO a way for company debt repayment than expansion
The Kotak Institutional Equities noted that while the pipeline of upcoming IPOs remains robust with over 200 companies with an estimated issue size of about Rs 2.9 lakh crore, the character of listings have changed. Instead of growth-driven issuances, a larger portion of new capital is being channelled toward debt repayment, promoter exits, and general corporate purposes.
Data from the report showed that “expansion or new project” utilisation has fallen steadily to 19% in 2025 from 25% in 2021, while “retirement of debt” has risen to 32% over the same period. This shift, Kotak said, reflects the increasing preference among companies to use the buoyant market to clean up balance sheets rather than fund capacity addition.
IPOs becoming way for exits by PE investors
Of the total Rs 1.17 lakh crore raised so far in 2025, offer-for-sale (OFS) transactions account for about Rs 43,000 crore, while fresh capital comprises around Rs 70,000 crore. This meant that nearly one-third of all IPO proceeds this year represented investor or promoter exits.
This high OFS component, Kotak noted, indicated how the primary market has turned into an avenue for partial exits by private equity investors and early backers rather than a platform for new equity infusion into businesses. This trend, while not alarming by itself, points to a market that is rewarding liquidity rather than innovation.
Listing performance: Enthusiasm meets reality
The Kotak report also tracked listing-day and post-listing performance of IPOs from 2021 to 2025. The data tell a clear story, a smaller share of companies now deliver listing gains, and a growing number are trading at or below their issue prices.
In 2021 and 2022, more than half the listings offered 25% or higher returns on debut. By 2024 and 2025, that proportion had fallen sharply, with a larger chunk of IPOs posting muted or even negative listing performance. “A rising share of companies are now quoting near or below their offer price,” Kotak said, citing data from Prime Database.
This isn’t a sudden collapse, but rather a steady erosion of post-listing enthusiasm, a pattern often seen in maturing market cycles. Retail investors who entered expecting quick gains are finding fewer such opportunities, and many stocks that debuted with strong demand are now trading 10–20% lower than their issue prices in the secondary market.
Fund utilisation shows shifting intent
The composition of IPO fund deployment offers perhaps the clearest signal of where the market stands. Kotak’s analysis of IPO utilisation between 2021 and 2025 shows consistent decline in funds allocated toward expansion and new projects, dropping to 19% in 2025 from 25% in 2021.
Meanwhile, retirement of debt has nearly doubled to 32% in 2025 from 17% in 2021, making it the single largest use category this year. General corporate purposes account for 11%, and issue expenses around 9%.
Kotak interpreted this as a rational, if somewhat conservative, use of capital. “The trend indicates that companies are prioritising balance sheet repair and liquidity over growth capex,” the brokerage said. However, from an investor’s standpoint, this also means fewer listings tied to future expansion a structural cooling beneath the headline activity.
Promoter exits gain pace amid buoyant sentiment
While the absolute quantum of IPO fundraising remains strong, the nature of participation is evolving. Kotak observed that several large OFS components in recent issues have been driven by private equity and venture investors looking to monetise part of their holdings.
Such behaviour, common near market peaks, signalled growing caution among institutional investors even as retail subscription levels remain high.
The hype versus the fundamentals
For example, while a handful of recent IPOs largely in niche manufacturing or PSU categories have held up well, many mid-sized consumer and tech issues have slipped below offer price within weeks of listing. The brokerage attributed this partly to valuation fatigue and partly to a disconnect between issue pricing and realistic growth visibility.
This divergence between subscription frenzy and post-listing returns, Kotak suggested, should prompt investors to look beyond grey-market buzz. “IPO participation continues to be driven by liquidity rather than fundamentals,” the report observed, implying that quality is taking a backseat to accessibility.
Kotak’s strategy note also noted that over 200 companies are waiting in the wings with a combined potential issue size of about US$35 billion or Rs 2.9 lakh crore. On paper, this pipeline looks healthy, but the brokerage points out that a significant portion belongs to sectors with limited near-term earnings visibility.
Kotak Institutional Equities October market view
Outside of the IPO focus, Kotak’s October strategy report maintained a constructive stance on broader market earnings, expecting moderate growth in FY26. However, it reiterated that valuations remain rich and stock selection will be critical.
For a market that has witnessed one of the busiest primary issuance years in recent memory, the underlying composition of capital tells a quieter story. Debt repayments are rising, promoter exits are frequent, and listing gains are shrinking all within a still-bullish retail environment.
Kotak’s numbers make one thing clear: the IPO market isn’t collapsing, but it’s maturing fast and perhaps losing the exuberance that defined its earlier phase.
A large pipeline and oversubscription headlines may suggest vitality, but the real test lies in what happens after listing. The report outlines a cautious stance, hinting that it’s time to trade optimism for discernment.
