 "IPOs worth $20 billion per annum are the 'new normal' for India: JP Morgan")
Initial public offerings worth $20 billion per annum are the "new normal" for India and will become an annualised run rate over the next few years, one of the biggest investment bankers said on Tuesday.
The market, which has seen a slew of initial share sales this fiscal, has already witnessed $21 billion of issuances in 2025, the same as last year, and we should close the year with over $23 billion, given the fact that some large issues like the ₹10,000 offering from ICICI Prudential AMC are in process, said JP Morgan.
"Yearly issuance of $20 billion is the new normal for India. It is the new watermark and will become an annualised run rate from here on," its head of equity capital markets, Abhinav Bharti, told reporters here.
Bharti said nearly a fifth of the demand is getting driven by consumer technology and new age businesses, and the same will go above 30 per cent as well over the next five years.
He said at least 20 startups, which command valuations in hundreds of millions in the private market, are preparing for an IPO at present.
Four to five companies are preparing for an issuance of over $1 billion, and will raise up to $8 billion between them, he said, adding that two of these are technology-driven businesses.
When asked about valuations for the new age businesses, Bharti said the Indian market has largely sorted the challenges which it was grappling with in the past, and added that some of the issues it had advised in the recent past are trading at a premium.
He said the investments done by private equity funds - which typically look for an exit in a few years - in the past will be one of the leading drivers of the IPO issuances staying high.
To a question on the lack of fresh capital raising and a bulk of the IPO activity being offer for sale by existing investors, he acknowledged that the private capital expenditure is sluggish in the country and added that qualified institutional placements are also low because of that.
The overall equity capital market piece, which also includes institutional placements and follow-ons, has been soft in 2025, he said, pointing that only $65 billion of issuances will be done in the current year as against $72 billion a year ago.
He attributed the shortfall to the lack of QIPs, pointing out that only $10 billion in issuances have been done as against over $22 billion in 2024. Even in the $10 billion, $3 billion is from SBI's offering, Bharti added.
The foreign flows should return to the Indian markets next year, the investment bank said, adding that Indian valuations are better from a relative basis now.
The country also offers a defensive play for investors who are looking for opportunities in the wake of the artificial intelligence boom in the developed world.
The overall market cap in India is set to double to $10 trillion in the next five years, and be third after the US and China, its co-head for investment banking, Nitin Maheshwari, said.
From a mergers and acquisitions perspective, there is better traction for outbound activity given the strong balance sheets with lower leverage and the confidence among companies, he said, adding that the targets will only be ones which are known to the Indian entity.
Japan and the Middle East have the largest interest in India from an inbound perspective, and the same will continue, Maheshwari said, adding that financial services are among the areas of interest.
Smallcap firms to face another tough year
The underperformance of India’s small-cap firms relative to large- and mid-caps this year, after two years of strong gains, is likely to persist into 2026 as stretched valuations, moderate earnings and thin liquidity continue to weigh, analysts said.
The market rebound through 2025 has remained narrow, leaving smaller companies unable to participate meaningfully. The Nifty small-cap index has fallen 9% in 2025, its first lag behind the Nifty 50 and Nifty mid-cap in three years, even as the two benchmarks touched record highs in November after 14 months on stronger earnings, policy support and firm domestic inflows.
Small-caps, particularly, have struggled to recover after confirming a bear market earlier this year. The index is 13% below the record highs hit in 2024, and nearly half the stocks in the index are still trading more than 50% below their all-time highs.
“Either valuations must correct further, meaning more pain for small-caps, or earnings in the second half must rebound so sharply that they start outperforming mid- and large-caps. Neither looks likely,” said Harsha Upadhyaya, chief investment officer at Kotak Mahindra Asset Management Company.
The weakness has hit retail investors the hardest. They account for about 35% of the NSE cash market activity and own 8.6% of NSE-listed companies, with high exposure to small- and mid-caps.
“Volatility and illiquidity premia in small-caps are hugely underpriced right now,” said Dhananjay Sinha, chief executive and co-head of institutional equities at Systematix Corporate Services.
Several fund houses have already halted or restricted inflows into small- and mid-cap schemes, a cautionary signal, even as retail investors continue chasing higher returns, Sinha said. Reuters
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