Synopsis: Many Indian IPOs struggle post-listing despite strong initial demand, with 80 of 155 offerings since 2023 trading below issue price. 12 have fallen over 50 percent and 33 over 30 percent. Weak company performance, inflated grey market premiums, anchor investor selling, sector hype, and early-stage business profiles drive these losses.
Many Indian IPOs attract huge attention and often get heavily oversubscribed, creating excitement among investors. But in recent years, a growing number of these newly listed companies have struggled to maintain momentum after debut, leaving early investors disappointed. Understanding why oversubscribed IPOs sometimes fail is becoming increasingly important for anyone looking to invest in the market.
The Indian IPO Market
An analysis of IPOs over the past three years indicates that many companies are struggling to sustain momentum after listing. Of the 155 public offerings with issue sizes of Rs. 500 crore and above that debuted since 2023, approximately 80 companies, or 51.7 percent, are trading below their issue price.
These IPOs raised a total of Rs. 3,39,584 crore through public offerings. The average loss stands at 27.5 percent, with the most extreme cases showing even steeper declines. 12 IPOs, representing 7.7 percent of the total, have fallen more than 50 percent, and 33 IPOs, or around 21.3 percent, are down over 30 percent since their debut.
According to the ETIG database, some of the weakest performers include Credo Brands Marketing, which has fallen over 65 percent since its listing; JNK India, is also down over 65 percent since its April 30, 2024 debut; Ideaforge Technology, which has declined 67.14 percent since listing on July 7, 2023; and Utkarsh Small Finance Bank, which is 63.02 percent below its July 21, 2023 issue price.
Ola Electric Mobility, listed on August 9, 2024, has dropped 58.87 percent, while Gandhar Oil Refinery (India), which debuted on November 30, 2023, is down 50.76 percent.
How Is It Affecting The Indian Economy?
IPOs as a Driver of Capital Formation
The initial public offering (IPO) market has long been a cornerstone of India’s financial ecosystem. Beyond being a mechanism for companies to raise capital, it serves as a critical driver for the broader economy. Through IPOs, businesses can mobilize resources that fund expansion, research and development, and operational scaling. This, in turn, facilitates capital formation at a macroeconomic level, providing the financial foundation for sustainable growth. For investors, especially retail participants, IPOs represent an opportunity to own a part of promising businesses and benefit from their growth over time.
Boosting Employment and Innovation
IPOs are closely tied to job creation. When companies raise funds through public listings, they often channel those resources into capacity building, infrastructure development, and new projects. These expansions typically translate into new employment opportunities, both directly within the company and indirectly across allied industries. Similarly, IPO funding accelerates innovation, allowing companies to invest in technology, product development, and service enhancements. This strengthens the domestic competitive landscape and can position Indian businesses on a global scale.
Encouraging Retail Investor Participation
Retail investor participation is a key facet of a healthy IPO ecosystem. The democratization of investment, where small investors can access shares of high-potential companies, encourages financial literacy and household savings. When IPOs perform well, this participation grows, reinforcing the vibrancy of capital markets and deepening the overall investor base.
The Consequences of Underperforming IPOs
A worrying trend has emerged in India: a rising number of IPOs are underperforming after listing. This has significant implications for the economy. Firstly, retail investor trust is at stake. Frequent post-listing losses erode confidence, leading many first-time or small-scale investors to either stay away from future IPOs or approach the market with extreme caution. Secondly, even fundamentally strong companies are affected. The shadow of underperformance creates scepticism among investors and analysts, making it harder for high-quality businesses to secure fair valuations or raise capital efficiently.
Impact on Long-Term Market Health
Finally, the health of the market itself is at risk. A weak primary market slows innovation and business expansion, as companies become hesitant to rely on public funding. Over time, this can impact the broader economy, limiting growth, reducing employment generation, and curtailing India’s potential to become a hub for innovative enterprises. In short, while IPOs have the power to fuel economic dynamism, a pattern of post-listing underperformance threatens both investor confidence and long-term market sustainability.
The Reasons Behind Weak Post-IPO Performance
The Indian IPO market has witnessed a paradox in recent years: despite strong initial demand and frequent oversubscription, a growing number of listings falter shortly after debut. Understanding why this happens requires examining market behavior, valuation dynamics, and the underlying performance of issuing companies.
Issuer Company Performance
One of the primary reasons IPOs stumble post-listing is the actual performance of the issuing companies. While pre-IPO marketing and investor presentations often highlight growth potential, many firms struggle to meet expectations once they are publicly listed. Post-IPO, slower revenue growth, declining margins, or limited progress on debt reduction can quickly dampen investor enthusiasm.
Additionally, delays in deploying IPO proceeds for intended expansions, missed operational milestones, or cautious statements from management often trigger disappointment in the market. Investors, especially retail participants, react sharply when promised growth does not materialize, leading to immediate selling pressure and declining share prices.
Glottis Ltd’s October 2025 IPO listed 35 percent below its Rs 129 issue price and fell further to 54 percent lower, as moderate revenue growth failed to meet expectations post-debut. Gem Aromatics, debuted flat in August 2025 but has dropped 56 percent due to posting losses.
Grey Market Premiums Inflate Expectations
Another significant factor is the role of Grey Market Premiums (GMPs) in shaping pre-listing sentiment. GMPs, often traded informally, create an impression of high demand and potential gains. However, these premiums are largely speculative and may not reflect genuine long-term investor interest.
As a result, the listing price is frequently inflated, leaving little room for upside once the stock begins trading on the exchange. When the reality of market demand sets in, early enthusiasm dissipates, causing prices to correct sharply. This disconnect between pre-listing hype and post-listing reality is a key driver behind the underperformance of many IPOs.
Anchor Investor Selling Pressure
Anchor investors, who typically take significant allocations before the IPO opens to the general public, can also influence post-listing dynamics. These investors are subject to lock-in periods, after which they are free to sell shares.
When they start offloading their holdings, it often results in sudden supply pressure in the market. Even if the company’s fundamentals remain intact, the influx of shares for sale can trigger downward movement in prices, adding to volatility and reinforcing negative sentiment among retail investors.
Sector Hype Outweighs Business Fundamentals
A broader market trend is the rush of companies to go public during periods of sectoral hype. Firms may time their IPOs to capitalize on investor enthusiasm for a booming sector, even if their own financials are not fully mature.
When the initial excitement fades and investors begin scrutinizing earnings, growth rates, and margins, the stock often experiences sharp corrections. Essentially, a strong narrative around a sector cannot substitute for solid business fundamentals, and many companies discover this the hard way once they are exposed to public market realities.
Early-Stage Companies Struggle Post-IPO
Finally, the profile of many recent IPO candidates contributes to post-listing weakness. A significant proportion of firms coming to market are early-stage businesses that are highly leveraged, not consistently profitable, and still in the process of proving product-market fit. Investors expect rapid growth and quick returns, but these companies often deliver moderate progress instead.
The gap between investor expectations and actual performance results in valuation compression and declining stock prices. For retail investors who participated during oversubscription, this misalignment can translate into immediate losses and diminished confidence in the IPO market overall.
Conclusion
In conclusion, the underperformance of many Indian IPOs is rarely due to a single factor. Instead, it is the result of a combination of overinflated pre-listing expectations, cautious or uneven company performance, speculative grey market activity, anchor investor behavior, and sector-driven hype. These dynamics together explain why IPOs may appear highly attractive and oversubscribed before listing, only to falter once they enter the public market. Retail investors, in particular, bear the brunt of these structural and behavioral mismatches, which undermines confidence in the market and reinforces a cautious approach to future public offerings.
Written by Manan Gangwar
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