IPO window

An IPO boom is usually described as a sign that investors are excited.

From the other side of the table, it is also a sign that sellers are excited.

Companies, promoters and private-equity funds choose when to come to market. They do not normally rush to sell when valuations are poor and demand is thin. They list when the window is open.

India’s window has been very open. FY 2025-26 set another record for IPO fundraising. That tells us the market can absorb a lot of supply. It does not tell us that every company supplying it is worth buying.

An IPO starts with the seller

Every issue has a use of proceeds.

A fresh issue brings new money into the company. It might build a factory, repay debt, fund working capital or finance an acquisition.

An offer for sale, or OFS, pays the existing shareholder who is selling. The company does not receive that money.

Neither structure is automatically good or bad. An early investor is allowed to exit. A promoter selling a small part may still own most of the business. A company raising fresh money can also waste it.

But the distinction tells me what transaction I am being invited into.

If most of the issue is OFS, this is mainly a transfer from an informed existing owner to a new public shareholder. I want to know why the seller chose this price and this moment.

Easy applications changed the size of the queue

Applying to an IPO used to take more effort. Now a person can apply on a phone and approve a UPI mandate in a few minutes.

That is good infrastructure. It also means a popular issue can collect an enormous number of applications without each applicant doing much work.

A subscription number measures demand for the available shares. It is not a score for business quality.

If a retail issue is subscribed 50 times, the company does not become 50 times better. It means many applicants are competing for a limited number of lots. In an oversubscribed retail category, allotment can come down to a draw among valid applications.

The large number looks like conviction. For many applicants it is a short listing trade with blocked money, not a five-year view on the company.

SEBI’s 2024 study found that investors other than anchors sold 54% of allotted IPO shares within a week. That is a useful reminder of what some of the demand is trying to do.

A record market attracts every kind of issuer

A good IPO market helps real businesses raise capital. It also gives promoters and funds a chance to exit.

Those can happen in the same issue.

The problem starts when the existence of demand becomes the case for investing. A hot market is good at clearing an issue. It is not necessarily good at leaving a margin of safety for the buyer.

The SME segment needs even more care. SEBI has warned investors about promoters using exaggerated claims and corporate actions to create a positive picture, sometimes followed by offloading at inflated prices. Smaller companies can have thinner trading, less research and more room for a story to run ahead of the accounts.

I would not use the smaller issue size as a reason to do less work.

The prospectus answers a simpler question

I do not read an offer document from the first page to the last. I go looking for a few things:

• how much is fresh issue and how much is OFS;
• who is selling;
• where the new money will go;
• whether the company needs the IPO to repair its balance sheet;
• related-party transactions;
• customer or supplier concentration;
• pending litigation;
• how the valuation compares with listed businesses doing similar work.

The risk-factor section is long because lawyers want it to be complete. The headings are still useful. They show which problems the company is required to place in front of me before I apply.

The “basis for issue price” section also matters. It tells me which peers and measures are being used to justify the valuation. A weak comparison does not become strong because institutions subscribed.

Listing demand and investment value are different

Grey market premium can help describe short-term demand. It cannot tell me what a business will earn.

The same is true of subscription. Both can matter to a listing-day trade. Neither replaces the work needed to own the company after listing.

I try to decide which decision I am making.

If it is a listing trade, I know allotment is uncertain and sentiment can change before the first trade.

If it is an investment, I ask the same questions I would ask about an already listed company. What does it earn? How much capital does it need? Who controls it? What am I paying? Why are existing owners selling now?

“It is an IPO” is not an investment thesis.

The window will close at some point

A record year brings more companies to the queue. Some deserve the money. Some are simply using the moment well.

This is normal. Capital markets are meant to connect people who need capital with people willing to provide it.

My job as a buyer is not to celebrate the size of the queue. It is to remember which side of the transaction chose the timing.