Liquidity glut to power IPO revival once volatility ebbs: Mahavir Lunawat

Lunawat says the current phase could reset valuations without derailing long-term capital formation

Amid heightened market volatility and a visible slowdown in deal activity, Mahavir Lunawat, chairman and managing director of Pantomath Capital, believes India’s capital markets are undergoing a structural shift rather than a cyclical downturn. With domestic liquidity at record levels and a robust pipeline of initial public offerings (IPOs), Lunawat, in an interview with Samie Modak in Mumbai, says the current phase could reset valuations without derailing long-term capital formation. Edited excerpts: 

How is the ongoing volatility impacting domestic equity capital markets? 

While the spike in volatility is a concern, two or three fundamental factors make the Indian market structurally resilient rather than purely cyclical. 

First is India’s demographic advantage — a large, young population and a sizeable domestic market. Second, strong growth in new-age sectors such as electronics, defence, aviation, rare earth, and renewable. At the same time, traditional sectors like engineering and manufacturing continue to grow steadily, as India is both a large domestic market and a reliable global partner. Together, these create strong demand drivers and a robust consumption story. 

Another key difference today is the nearly ₹6–8 trillion funds that remain undeployed in equities. The formalisation and channelisation of savings into capital markets have created a large liquidity pool. 

Earlier, market cycles were heavily dependent on foreign flows. Today, strong domestic liquidity has made cycles shorter. Instead of long multi-year bull or bear phases, we now see several cycles within a year. Once volatility settles, available liquidity could trigger a sharp upswing in capital formation across both private and public markets. 

But with markets correcting, IPO valuations also need to adjust. Are issuers willing to recalibrate expectations? 

Valuations align with market conditions. If a sector trades at a certain multiple in the secondary market, IPO pricing cannot deviate considerably.

 

Currently, over 230 IPO documents are at various stages of approval. Another 150 filings could come in the next six to eight months — about 400 companies in the pipeline.

 

As markets stabilise, issuers will adjust valuations in line with prevailing conditions. When liquidity is available, and companies have growth plans, price discovery happens naturally through demand–supply dynamics.

 

Do all filed IPOs eventually reach the market? 

Historically, no. Over the past five years, roughly one in four IPO filings has not led to a listing.

 

There are several reasons. Market cycles are becoming shorter. At times, there is a valuation mismatch between issuers and investors. In other cases, sector dynamics shift during the process — what looked attractive initially may no longer be compelling by the time the company is ready to launch.

 

We saw this in sectors such as renewable and chemical, where post-pandemic enthusiasm has moderated. As cycles shorten, investor interest can shift quickly.

 

So you believe the current volatility will not derail broader market momentum? 

Yes. The structural drivers remain intact. Volatility may slow momentum temporarily, but it will not derail the medium- to long-term trajectory.

 

Uncertainty is visible across asset classes — gold, silver, real estate, and commodities. Once crude stabilises and geopolitical tensions ease, investors will return.

 

India stands out as a relatively stable economy, and global uncertainty could divert more capital towards markets like India.

 

Do you see retail or household flows slowing due to recent volatility? 

So far, flows have remained steady. Investors recognise that uncertainty exists across asset classes, not just equities.

 

Financial awareness has also improved, driven by regulatory and industry initiatives. Even today, mutual fund penetration in India is just 5–7 per cent, compared with 60–65 per cent in developed markets.

 

Even if some investors pause, new entrants could offset the drag. We do not see systemic risk to domestic fund flows.

 

Will this year see more billion-dollar IPOs, such as those expected from companies like PhonePe, Zepto, or Flipkart?

We may see more large IPOs this year. During turbulent periods, investors tend to prefer established, large-scale businesses that offer greater comfort and stability.

 

India will continue to see a large number of mid-sized IPOs, given its entrepreneurial base. But in value terms, large offerings could contribute more this year.

 

Recent IPO listings have underperformed. Could weak post-listing performance hurt retail sentiment? 

Retail participation has been subdued. However, data from the past two years shows that about 55 per cent of IPOs traded at a premium after listing. In comparison, over 80 per cent of stocks in the secondary market traded below their trailing 12-month averages during the same period.

 

IPO proceeds are meant to fund expansion or working capital. It typically takes four to five quarters, or longer, for companies to deploy capital and reflect growth in financials. Judging IPOs purely by listing gains is not appropriate.

 

As markets mature, listing pops will likely become less pronounced, and IPOs may trade within a more stable range.

 

Investment banking is highly competitive. How does Pantomath differentiate itself?

  We approach the business differently. Over the past decade, we have engaged with growth-stage companies across Tier-II, Tier-III, and Tier-IV markets. By mentoring and supporting these businesses, we are helping expand the investment banking ecosystem.

 

Many mandates come through repeat transactions or referrals, indicating that clients see us as long-term partners rather than transaction advisors. We increasingly act as an extended team or in-house advisors to business houses and families.

 

At the same time, India’s capital formation needs are vast. If equity fundraising reaches ₹8–10 trillion annually, the ecosystem — including bankers and intermediaries — will need more capacity.

 

What is the long-term vision for the group? 

Financial services rest on three pillars: capital seekers, capital providers, and intermediaries.

 

Our strategy is to strengthen all three. Over the past decade, we have engaged with more than 7,000 companies, building a strong corporate network. We also maintain deep relationships with global investors and family offices.

 

In parallel, we are expanding our distribution and advisory network, especially in Tier-III and Tier-IV markets. With over 600 employees and leadership drawn from global organisations, the goal is to build an integrated ecosystem and one of India’s most trusted homegrown financial services firms.