India’s IPO market faces scrutiny over pricing, genuine investor demand and regulatory safeguards as listing risks test public confidence.
The facts of the case are straightforward, and none of them suggests wrongdoing. The issue raised ₹276.57 crore (about US$29.2 million at the Reserve Bank of India's (RBI) October 19, 2026 reference rate of ₹94.77 per dollar) but brought no fresh capital into the company: the prospectus lists the fresh issue as "Not applicable." Every rupee went to the sellers through an offer for sale (OFS), in which existing holders sell their shares rather than the company issuing new ones. Because the company did not meet the profitability criterion under Regulation 6(1) of the Securities and Exchange Board of India (SEBI) Issue of Capital and Disclosure Requirements (ICDR) Regulations, it entered the market under Regulation 6(2), which requires at least 75% of the offer to be allocated to qualified institutional buyers (QIBs) and limits the retail portion to 10%.
Date | Event | Figure |
|---|---|---|
Oct 27, 2023 | 1:10 share split and 255:1 bonus, before the IPO | Acquisition costs restated: ₹23.52 and ₹30.87 |
Aug 5, 2024 | Anchor book | 1.15 crore shares to 14 funds, about ₹124 crore |
Aug 6–8, 2024 | Subscription window, band ₹102–108 | 168.35 times overall; retail about 131 times |
Aug 13, 2024 | Listing | Opened ₹235 (NSE); closed near ₹210 |
Sep 1, 2025 | Preferential share issue | No split or bonus after listing |
Oct 19, 2026 | Observation date | Closed ₹82.52; 52-week range ₹78.51–138.90 |
The returns depend almost entirely on when an investor arrived. A retail applicant fortunate enough to receive one lot of 138 shares paid ₹14,904 and could have sold at the opening for about ₹32,430. By the observation date, the same lot was worth about ₹11,388, representing a loss of 23.6%. A buyer at the opening price is down 64.9%, and a buyer at the listing-day close of about ₹210 is down roughly 61%, while the Nifty 50 fell about 5% over the same span. With retail demand roughly 131 times the number of shares available, most retail applicants would not have received an allotment; the largest losses fell on those who bought shares in the open market after listing. None of this proves manipulation. A popular issue can be priced fairly, open on enthusiasm and then fall because growth disappoints or sentiment turns. The case matters because it shows how far apart the people who supply liquidity and the people who capture its value can end up.
The scale of the market makes that question unavoidable. According to PRIME Database figures, 103 mainboard IPOs raised ₹1.76 lakh crore (about US$18.6 billion) in 2025, a record for the second year running after ₹1.60 lakh crore from 91 issues in 2024. Small and medium enterprise (SME) platforms constitute a separate market governed by distinct rules: 267 SME listings raised ₹11,429 crore in 2025, 91% of it fresh capital. The same mainboard data carry warnings. The average listing gain, measured at the listing-day close, fell to 10% from 30% the year before. As of December 24, 2025, only 54 of the year's 102 issues traded above their offer price. The average number of retail applications per issue fell to 14.99 lakh from 18.87 lakh. This represents genuine financial deepening, but its benefits have not been distributed uniformly.
Where the allocation of IPO proceeds goes has become the most cited statistic. PRIME data reported in August 2026 show that of the roughly ₹2.37 lakh crore raised by mainboard IPOs from January 2025 to August 2026, ₹1.45 lakh crore, or 61.2%, came through offers for sale, against ₹92,175 crore (38.8%) of fresh capital. The figure holds up, but it needs context. Calendar 2025 alone ran higher, at 63.4% (₹1,11,495 crore), with promoter sales at 45% of the total and private equity and venture capital sales at 12%. The first eight months of 2026 were therefore less OFS-heavy than 2025, not more. PRIME's managing director has traced the rise of the OFS component to the period after 2012–13 and linked it to the life cycle of private equity funds that began investing in India in the early 2000s. This suggests that a high OFS share is a long-standing feature of Indian listings rather than a sudden spike. An exit by an early backer who financed a company through its riskiest years is a legitimate use of a public market. The key questions are whether the price has been discovered fairly and whether buyers understand that the proceeds are not funding the company's growth.
That understanding is often shaped by a number no regulator produces. The grey market premium (GMP) is the informal indicator of the premium at which allotted shares, or applications, change hands before listing. Unicommerce's was reported at more than 63% before its debut. A GMP is an unregulated, unaudited quote from an informal market, not a forecast, and the aggregators that publish it can be cited only as reported estimates. Research on investor behavior suggests why it still matters. Individual investors tend to buy attention-grabbing stocks, because attention determines what they consider before preferences determine what they choose; a widely quoted premium is that kind of signal. SEBI's own 2024 study of 144 mainboard IPOs found that individual investors sold 50% of their allotted shares by value within a week of listing, and 67.6% when listing returns exceeded 20%. For many applicants, an IPO is a listing-day trade, and the grey market helps shape their expectations of the listing price. The regulator has acknowledged as much: early in 2025, SEBI's then chairperson said the regulator was considering a regulated pre-listing trading mechanism because "even in those three days there is a lot of trading that happens." In August 2024, SEBI also amended its intermediaries regulations to bar regulated entities from associating with unregistered persons who give securities advice or make performance claims, with an October 2024 circular setting the transition. Those rules reach the paid promoters of hype, but not the grey market itself.
The demand side has been restructured more than is often recognized. Subscriptions are made through ASBA (Application Supported by Blocked Amount), under which an applicant's money stays in their own bank account, blocked through a Unified Payments Interface (UPI) mandate for retail bidders, and is debited only on allotment. Large mainboard IPOs allocate shares among QIBs, non-institutional investors (NIIs) and retail individuals. Up to 60% of the QIB portion can go to anchor investors, institutions allotted shares a day before the issue opens, with one-third of that reserved for domestic mutual funds. Their price helps anchor the book-building process, in which bids across a price band reveal demand and set the final price; this is what price discovery means in an IPO. Two reforms changed the role of leverage in driving that demand. For issues opening on or after April 1, 2022, half of each anchor allotment has been subject to a 90 days lock-in, rather than the previous 30-day period. The RBI's scale-based framework for non-bank lenders introduced a ceiling of ₹1 crore per borrower on IPO financing, effective April 2022, after the RBI noted that banks faced a ₹10 lakh limit and non-banks none. SEBI's study recorded the effect: NII oversubscription halved from 38 times to 17 times, and applications above ₹1 crore fell from about 626 per IPO to around 20. Leveraged demand inflated subscription numbers before 2022; it does so far less now.
Hong Kong offers a useful test of regulatory method, not a model to be copied wholesale. On October 13, 2026, the Securities and Futures Commission (SFC) issued circular 26EC62 and a press release describing "dubious arrangements in certain IPOs, where listing applicants apparently provided undisclosed subscription funds or guaranteed returns to designated investors or their connected parties." Such arrangements, the SFC said, "compromise market integrity by distorting genuine investor demand, impairing fair price discovery and exposing public investors to harm." The circular lists six red flags: substantial payments, loans or investments by the applicant in favor of investors, "particularly those made shortly before listing"; investors who appear related to the applicant; "active involvement by the listing applicant in investor selection, bookbuilding or allocation beyond its ordinary role"; "unusual subscription orders, including substantial orders shortly before the close of order book"; arrangements that conceal ultimate investors, including derivatives "with returns guaranteed by the listing applicant"; and pre-agreed commitments that lead to "insufficient adjustments to the offer size and timetable despite weak genuine investor demand." Intermediaries must assess these "individually and collectively," reject suspicious orders "where concerns remain unresolved" and report them to the SFC and the exchange.
The weight of those documents should be interpreted carefully. The circular sets out risk indicators and supervisory expectations, backed by enhanced scrutiny, rather than findings against named issuers, and the SFC's chief executive stressed that "most market participants play by the rules." Its context was a sponsor-capacity problem. In January 2026, the SFC reported "serious deficiencies in the preparation of some listing documents" amid a surge in applications, and had suspended vetting of 16 applications as of December 31, 2025. By October, active applications had risen past 610, vetting of 65 had been suspended between January and September, and the share of applications handled by the top five sponsors had fallen from 77% to 65%. Nothing in this record shows that Indian issuers fund their own demand. What it supplies is a checklist for where artificial demand would show up: in the anchor book, in late large orders, in investor concentration and in an offer that does not shrink when real interest is thin.
Dimension | India (SEBI) | Hong Kong (SFC) |
|---|---|---|
Core instrument | ICDR Regulations; Merchant Bankers Regulations; fraud and unfair-trade regulations | Code of Conduct for intermediaries; sponsor regime; circular 26EC62 |
Demand safeguards | ASBA blocking; anchor lock-in 50% for 30 days and 50% for 90 days; NII allocation reforms; RBI ₹1 crore financing cap | Six red flags on payments, related investors, allocation, late orders, concealment and pre-agreed commitments |
Gatekeeper rules | Two merchant-banker categories (net worth ₹50 crore and ₹10 crore) | Sponsor and principal capacity reviews; vetting suspensions |
Current posture | Enforcement concentrated on SME issues | Supervisory circular naming no issuer |
Treatment of grey market | Pre-listing platform under consideration since 2025 | Not addressed in the circular |
India's own enforcement record points to a different and more specific risk: diversion of proceeds after listing, concentrated on the SME platforms. In October 2024, SEBI's interim order on Trafiksol ITS Technologies froze the issue's proceeds; a final order on December 3, 2024 directed refunds to investors and cancellation of the shares. A November 2025 report on an investigation into about 20 SME issues managed by one merchant banker described alleged diversion of up to ₹100 crore, citing unnamed sources; that probe remains an allegation, not a finding. Such cases need to be kept separate by stage, because allegation, interim order, final order and appeal before the Securities Appellate Tribunal (SAT) carry different weight. The regulator responded with structural changes. In December 2024 it approved new merchant-banker rules that bar smaller bankers from managing mainboard equity issues. In March 2025 it tightened the SME framework, requiring operating profit of at least ₹1 crore in two of the three preceding years, capping the OFS component at 20% and raising the minimum application to two lots.
The mainboard record after listing is mixed rather than damning. The five largest mainboard IPOs of 2025 by issue size, measured from listing-day close to the October 19, 2026 close, show the spread:
Issue (listing date) | Size (₹ crore) | Issue price (₹) | Listing-day close vs issue | Oct 19, 2026 close vs issue | Nifty 50, listing to Oct 19, 2026 |
|---|---|---|---|---|---|
Tata Capital (Oct 13, 2025) | 15,512 | 326 | +1.4% | −3.6% | −9.3% |
HDB Financial Services (Jul 2, 2025) | 12,500 | 740 | +13.6% | −31.2% | −10.1% |
LG Electronics India (Oct 14, 2025) | 11,607 | 1,140 | +48.2% | +49.6% | −9.0% |
ICICI Prudential AMC (Dec 19, 2025) | 10,603 | 2,165 | +19.4% | +28.2% | −11.9% |
Hexaware Technologies (Feb 19, 2025) | 8,750 | 708 | +7.7% | −18.9% | −0.2% |
Two of the five, LG Electronics and ICICI Prudential AMC, both offers for sale by their foreign promoters, have rewarded allottees and beaten the index; three trade below their offer prices. A high OFS share therefore does not predict poor returns. Listing-day enthusiasm predicts little about the price a year later, and that distance separates the public's expectations from the market's eventual verdict.
Safeguards should match those risks, starting where the cost is lowest. The first is disclosure of destination. Every offer document already shows the split between fresh issue and OFS, but the cost of acquisition for each seller is buried deep in the prospectus. A single front-page line showing the issue price as a multiple of each seller's cost would help retail investors without any new restriction on exits. The second is to bring pre-listing trading inside the system. A regulated pre-listing platform would replace an unaudited premium with an observable price, at the cost of exchange build-out and possibly earlier speculation. The third is to adapt Hong Kong's demand checklist to Indian book runners: documented checks on late large orders, concentration in the anchor book and investor links to the issuer, reported to SEBI in aggregate. This would raise compliance costs for bankers but presume no guilt. The fourth is to keep enforcement focused on the SME segment, where interim and final orders have actually established harm, with faster movement from interim to final orders. Each reform would impose some cost on bankers or exchanges, but none would require treating a shareholder's exit as an offence.
India's IPO market has done what deep markets are supposed to do. It has enabled founders and early investors to sell their holdings, widening household participation in listed companies, and allowing institutions to price risk at scale. But oversubscription measures how many people wanted in at a given price, not whether that price was sound or whether the demand was genuine. Hong Kong's circular offers a precise way to test the second question without presuming misconduct. Liquidity can sustain a market for years, but only credible price discovery, transparent allocations and genuine investor demand can sustain the trust on which that market ultimately depends.
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