Kolkata: The new issue market is buzzing with activity. Some experts are even saying that the flood in 2025 will exceed the high water mark set in 2024. This year between January and August Indian companies have raised more than $8.2 billion through new issues despite underperformance by the secondary markets compared to the Asian and emerging market. Some analysts are expecting IPOs to raise $17-$20 billion in 2025.
The obvious question in many lips in this primary market buoyancy is: are there any underlying risks in this spate of funds in the primary market? Or, is there nothing to fear? Ram Medury, founder and CEO of Maxiom Wealth told News9 about his observation of a polarized market with overheating in selected pockets.
“Focus on quality mainboard issues”
“We’re witnessing a polarised market with selective overheating. The SME segment shows alarming distress; 61 of 147 SME IPOs trade below issue price, with 30 down over 50%. Artificial demand through leveraged applications creating 300x oversubscriptions has right prompted SEBI intervention. Mainboard valuations at 27x P/E match US levels, concerning, for a so called emerging market,” Medury told News9. while pointing out the stable core.
He mentioned about the monthly SIP inflows of 28,464 crore (in July and rising almost every month), domestic investors controlling two-thirds of funding, and IPO volumes already self-correcting down 30% while maintaining capital raises. “My recommendation is to avoid speculative SME plays entirely, focus on quality mainboard offerings with proven profitability,” he remarked.
Dangerous herding and dangerous leveraging
Medury sounds concerned about the SME IPOs in particular. “The most concerning fact is that 61 of 147 SME IPOs trade below the issue price, averaging -31% losses, yet retail investors leverage 9 lakh crore in personal loans for IPO applications. As a fund house, Maxiom generally recommends capping single fund house exposure at 30%, limit SME IPOS to 5% maximum, avoid sector funds exceeding 20% allocation, and absolutely no leveraged IPO investments,” he said.
He also flagged other risks from the IPO euphoria one of which is systemic concentration. “Top 3 fund houses control 36% of Rs 74.84 lakh crore AUM, with 82% originating from just 30 cities. The Sensex’s top 3 stocks command 32% weight which defeats diversification. We’re seeing dangerous herding into 202 sector-thematic NFOs launched in 2024, with technology funds showing 89% sector concentration,” Medury doesn’t seem to be one to mince words.
“Unprecedented opportunity set for sophisticated portfolios”
Despite his words of caution, Medury is quick to point out the macro picture of the equity markets. “India captured 25% of global IPO volume in 2024 with 327 listings, raising $19.9 billion. The structural transformation is remarkable: domestic investors now fund two-thirds of IPOs versus one-quarter previously, driven by record SIP inflows. SEBI’s reforms slashed listing timelines from 317 to 23 days while eliminating the 1% security deposit requirement. Combined with 6.5% GDP growth, infrastructure spending of Rs 11.21 lakh crore, and Indian IPOs commanding 21.5x P/E versus 14x US valuations, this creates an unprecedented opportunity set for sophisticated portfolios,” he said.
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, INVITs, any form of alternative investment instruments and crypto assets.)