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The year 2025 was a watershed year for the country’s primary markets. Companies from different industries lined up to list on the stock exchanges, thus raising a record Rs. 1.75 lakh crore through mainboard public issues, along with another Rs.

11,429 crore through SMEs.Although as the year ended, a different picture came up. Nearly half of the stocks that debuted during the year were trading below their issue prices by late December. This raised a simple question: why did some IPOs keep delivering big gains while others faltered despite similar investor enthusiasm?

IPO pricing: Hype meets valuation

An IPO’s price/value is not determined on listing day – it is set weeks earlier through:

• Company fundamentals (revenue growth, profitability, cash flows)
• Peer valuations (listed comparables in India and globally)
• Market conditions (liquidity, interest rates, risk appetite)
• Demand signals during anchor and institutional book-building

Listing-day pop vs long-term performance

A key structural feature of the IPO market is the 35 per cent retail allocation, which often leads to strong listing-day demand.

When supply is limited but the sentiment is positive, stocks can debut at high premiums, even if fundamentals are stretched.

• 69 out of 103 IPOs in 2025 were listed above issue price.
• However, only 54 remained in positive trajectory by late December.

Once the initial buying frenzy fades away, stocks must rely on earnings delivery, guidance clarity and institutional support, to continue their profit streak.

Size matters: Why small IPOs struggled more

Data from 2025 showed a clear pattern:

• The worst-performing IPOs were all sub-Rs 1,000 crore issues.
• Many fell 30 to 50 per cent below their issue prices

Smaller IPOs tend to suffer from:

• Lower institutional ownership
• Thinner post-listing liquidity
• Greater vulnerability to earnings misses

Expert insight: Explaining the fundamentals

Listing-day prices are driven by sentiment and scarcity, while the long-term returns are driven by cash flows and actual execution.

Market experts talked to TOI about how divergent performance of IPOs stems from the way listing prices are discovered versus how stocks are ultimately valued in public markets.According to Sudhir Bassi, Partner at Khaitan & Co, an IPO’s listing price is influenced by a combination of oversubscription levels, company uniqueness, relative fundamentals, industry dynamics and broader market sentiment on the day of listing, making outcomes difficult to predict based on any single factor.Thomas V Abraham, Research Analyst at Mirae Asset ShareKhan, said that listing-day pricing reflects business strength, growth momentum, earnings quality, scalability and bidding intensity, often amplified during favourable market phases when benchmark indices are strong and valuations are stretched.Meanwhile, Anupam Saxena, IPO consultant, explained that issue pricing itself is guided by analyst assessments such as peer comparisons, projected cash flows, balance-sheet health, planned use of funds and supportive industry trends.

Hype vs fundamentalsMarket experts, while talking to TOI, cautioned that while investor enthusiasm and heavy subscriptions can drive sharp gains in the initial days after listing, such momentum is rarely durable without strong fundamentals backing it. Khaitan & Co’s Sudhir Bassi explained that hype-driven price movement tends to fade away once early excitement subsides, with long-term stock performance, ultimately anchored in business fundamentals, coming into play.ShareKhan’s Thomas V Abraham shared similar insights that listing-day rallies are often fuelled by crowd psychology, bid intensity and informal market cues, but sustained performance depends on measurable factors such as capital efficiency, earnings growth and balance-sheet strength.Meanwhile, IPO consultant Anupam Saxena said that although sectors like technology and AI saw sharp debut-day jumps amid strong demand, many such stocks corrected as quarterly results exposed gaps between investor expectations and actual performance.

Post IPO trackingMarket experts, talking to TOI, said post-listing performance needs to be assessed with regards to evolving market judgement rather than fixed benchmarks such as the IPO issue price. Once a stock is listed, price discovery shifts from a narrow process to continuous market evaluation, exposing companies to sentiment shifts, liquidity conditions and earnings scrutiny.Sudhir Bassi, Partner at Khaitan & Co, pointed out that, “The comparison with IPO price is not a right perspective.

IPO price is determined based on the judgement of a few, however upon listing the stock trades on the judgement of the market as a whole which gets reflected in traded price which keeps on changing every second.”The uneven post-listing performance of IPOs was evident across 2025 and the year before that. Thomas V Abraham, Research Analyst at Mirae Asset ShareKhan, talked to TOI about “standouts from 2024 captured mood-driven leaps”, citing examples where “Swiggy edged up 7.69% past its ₹390 cap on solid bids, Mamata Machinery vaulted 159% right away, and One Mobikwik Systems gained 89%.”

At the same time, he noted that sentiment-driven gains were fragile, as “Carraro India sank 9.63% as fervor faded, joining 19 others in the red at open.

”A similar divergence played out in 2025. “Early 2025 mirrored the swings,” Abraham said, highlighting that “Stallion India Fluorochemicals beat its ₹90 top by 33%, Aditya Infotech hit 50% upside,” while others moved the other way, with “Indo Farm Equipment losing 9% and Afcons Infrastructure shedding 14% quickly.”

Despite strong institutional interest—“FY25’s 80 mainboard entries (April 2024–March 2025) saw QIB bids at 102x average”—many stocks still corrected, as “15–30% dips hit plenty as buzz cooled.

”The correction deepened as market conditions tightened. “Mid-2025 brought reality checks for 2024 graduates, with over 60% of them dipping under offer prices,” Abraham observed, adding that midcap and smallcap indices fell “anywhere between 18% and 22%.”

He also flagged the role of external pressures, noting that “foreign investor exits and reset expectations stalled big plans like Tata Capital’s $11 billion push,” pushing issuers towards more realistic pricing.As the ShareKhan research analyst put it, “endurance players thrive by anchoring on proven metrics, not launching fireworks, since pullbacks routinely follow when crowds thin out.”Anupam Saxena, IPO consultant, sharing his own insights said, “The first six months were volatile as lock-in periods ended and early investors sold shares.

After one year, actual business performance became clear, cutting through the promises made in offer documents.”Further talking about the contrast in the IPO market of 2025 and 2024, he added, “While 2024 was driven by hype and volume, 2025 saw investors focus more on profitable companies with strong cash flows. Many SME IPOs listed at lower prices, often due to aggressive valuations balanced by large discounts.”

Investor interests: What matters

Retail investors approach IPOs with a mix of long-term intent and short-term opportunism, though behaviour in practice often tilts towards listing-day outcomes.While some investors actively look for businesses with long-term growth potential, market share expansion and the ability to generate sustainable cash flows, others admit that their primary objective is capital appreciation through listing gains rather than long-term ownership.Some retail investors talked to TOI about what factors they look at to decide an IPO is worth investing.One investor mentioned looking at a company’s plans, profitability prospects.

I check what sector and company it is, then focus on debt, revenue growth, margins, cashflow, and P/E, P/S with listed peers to know if it is not over priced. Then the use of IPO like expansion, debt reduction or R&D. Apart from that, I check its management, promoters.

Amanjeet Singh, 23

Another, Shivendra Singh, also talked about the importance of looking at company fundamentals.

First, strong Company fundamentals. Second, it should be profit making. Third, not too much of the debt component. Lastly, the products they make should have market demand.

Shivendra Singh, 26

Meanwhile, 64-year-old Om Prakash Bhatia, pointed to the significance of the Red Herring Prospectus, expert insights and the firm’s actual business model.

As a general retail investor, I look at the company's red herring prospectus for details, grey market premium for pricing insights, and hear analysis on business news channels to decide on applying for an IPO. I look for the company’s performance, it’s business model, if it’s a manufacturer- then source of raw materials, clients (domestic/international),competition in market, comparison of share value / valuation with competitors.

Om Prakash Bhatia, 64

A regular trader in his 30s, Chanchal Bainsla gave an in-depth insight on what he observed, while drawing contrast between mainboard and SMEs.

What I observe is that most retail investors apply to IPOs only for listing gains. The intention is rarely long-term ownership. Around 90% of retail investors judge an IPO only based on Grey Market Premium (GMP). They don’t read the financial statements , business model , competitive advantages and promoter's background. The biggest problem is that SME companies are hard to evaluate initially. In case of Mainboard IPOs, company's information is easily available. Still only about 10% of retail investors go beyond GMP.

Chanchal Bainsla

Another investor, 26-year old Nishu Kathuria, an Economics student, said her focus is mainly on the company's fundamental figures and expansion prospects.

As an Investor, I look for capital appreciation or stable source of dividends.A combination of both is the best case where I am usually willing to pay even at the higher end. A very important factor is the market , which sometimes has higher expectations of people, where people may believe a higher return, however fundamentals don't really support. Those are cases where an IPO can lead to capital losses. So, my call highly depends on fundamentals and their ability to expand.

Nishu Kathuria, 26

Size amplified hype, but not the outcomes

The IPO market witnessed a wave of IPOs in 2025. The sheer size of them often created substantial media attention and investor excitement.

However, a closer look at the actual post-listing performance suggests that the size of an issue did not necessarily translate into long-term gains for investors.One way to understand the distinction between hype and actual fundamentals is to analyse the top 10 IPOs of the year (based on offer size). These companies ranged from traditional financial institutions like Tata Capital and HDB Financial Services to tech-driven startups like Lenskart Solutions, Meesho, and Billionbrains Garage Ventures (Groww).

Most of these offerings got a lot of attention because of their size and their brand names, leading to significant listing gains. LG Electronics India listed at Rs 1,715, while its issue price was Rs 1,140, marking a jump of 50.44%, while Meesho and Billionbrains Garage Ventures surged 46.4% and 14% on debut, respectively.However, the post-listing story diverged for several stocks. LG Electronics India, despite its large debut, was trading at Rs 1,522.05 by December 31, a 11.25% drop from its listing price.

Similarly, HDB Financial Services and ICICI Prudential Asset Management saw their early listing gains temper or reverse in the months that followed.Some IPOs, however, told a different story. Lenskart Solutions listed slightly below its issue price of Rs 402, at Rs 390. But by the end of the year, it touched Rs 450.6, a jump of 15.54 per cent over its listing price and 12.09% over its issue price.Meesho and Billionbrains Garage Ventures also delivered sustained gains, with 2025's closing prices well above their listing and issue levels, showing that a modest debut does not preclude strong long-term returns.National Securities Depository Ltd, is also an example of a share giving good gains even after the listing-day buzz. It opened on BSE with a 10 per cent premium and ended the year with a 32.89 per cent gain over its IPO price. Overall, 2025 demonstrated a key lesson for investors: large IPO size and listing-day buzz creates buzz, but real returns depend on how the market reassesses the stock once the hype fades and all that remains is its actual sustainable qualities.

What this means for 2026

India’s IPO market is entering a new phase, with expectations running high for a robust primary market cycle. The 2026 pipeline remains strong, but the lessons of 2025 have raised the bar for both investors and issuers. Top performers of the year ultimately grew because of scalable business models, clear profitability pathways, strong sector tailwinds and reasonable pricing relative to growth.

Investors should:

• Focus more on cash flows and profitability over narratives and hype.
• Reward reasonable pricing rather than chasing aggressive valuations.
• Prefer companies raising capital for growth initiatives rather than exits.

The broader takeaway is that the market is maturing. IPOs will increasingly be evaluated on long-term value creation rather than short-term momentum, and both domestic and institutional investors are expected to make decisions based on fundamentals and sustainability.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)