India’s primary market has been buzzing through 2024-2025, with a steady flow of companies tapping into strong domestic liquidity. But veteran fund manager Prashant Jain, co-founder and Chief Investment Officer (CIO) of 3P Investment Managers, sees the current trend through a very different lens.In a conversation with The Economic Times, Jain said the rush of public issues is far from random, it follows a pattern the market has witnessed in past cycles.
Let’s take a look at what is driving his caution and the key risks he believes are emerging in the IPO market.
A familiar pattern: When too much money chases new listings
As per the Economic Times report, Jain explained that whenever liquidity in the market becomes abundant and certain pockets of stocks get richly valued, the supply of new shares through Initial Public Offerings (IPOs) rises sharply. He pointed out that similar phases were seen in 1992, 2000, and 2007–08, when a jump in IPO activity coincided with overheated segments of the market.
According to him, this is what is happening again. The surge in issues is less about long-term fundamentals and more about issuers trying to take advantage of strong market sentiment and high valuations.
Why popular themes are flooding the IPO market
Jain noted in his conversation with Economic Times, that the most active areas in today’s IPO market are those where investor interest has been the strongest in recent years. As per Jain’s interview in the Economic Times report, themes such as internet-driven platforms, electric vehicles (EVs), manufacturing, and small- and mid-cap companies are receiving heavy supply.
He believes this is happening because these sectors currently enjoy high valuations. This makes it attractive for promoters and early investors to sell shares to the public. According to him, market enthusiasm in these pockets is creating an environment where companies can command valuations that may not match their long-term potential.
Jain’s warning: Many new listings may disappoint
Prashant Jain offered a clear caution in the Economic Times interview with him. He said that in the majority of these new listings, “the long-term outcomes will be quite disappointing.”
According to him, this is not necessarily because the businesses are bad, but because the valuations at which they are coming to market are difficult to justify once market enthusiasm cools. High pricing leaves very little room for investors to absorb volatility or slower-than-expected growth in earnings.
Loss-making new-age companies: The valuation question
Many of the recent IPOs belong to new-age businesses that are still loss-making. Jain in the interview with Economic Times explained that the issue isn’t the lack of current profits. Instead, the concern lies in whether the company can eventually reach profitability levels that justify the valuations being demanded.
According to the Economic Times report, he said that in several cases, the asking price is disproportionately large compared to the company’s total market opportunity, or the profits it can realistically generate over the next few years.