Small IPOs face listing delays as mutual funds turn selective amid broader market volatilities

“There is clearly more selectivity. In the ₹2,000–3,000 crore range, deals need sharper differentiation on growth, quality, and valuation to see strong traction,” said Raghav Gupta, joint chief executive officer, IIFL Capital. He added that there is rising participation from family offices, high networth individual/ ultrahigh networth individual (HNIs/UHNI) investors, and alternative investment funds (AIFs) while select global long-only investors continue to back mid-sized, high-quality stories.

“Larger mutual fund AUMs (assets under management) naturally gravitate towards bigger, more liquid deals, while recent volatility has made investors more valuation conscious. The bar has gone up, not the appetite gone down,” Gupta said, adding that some companies are exploring private capital either as a bridge or an alternative to IPOs. “This is opening up attractive opportunities for PE/VC (private equity/ venture capital) players to deploy capital in quality businesses.”

PE funds step in

Moreover, private capital is bridging the gap with more than 10 IPO mandates having shifted to a dual model, Mint reported last month. The IPO companies are preparing for a public listing while also looking at raising funds from private sources, particularly for deals in the ₹500 crore to ₹2,000 crore range.

For context, nearly half of all companies (a little over 40%) to have filed draft papers have planned to raise ₹2,500 crore or less, according to Prime Database.

“If the mutual funds are seeing that the secondary market is giving them more attractive opportunities to put their money at work, they are less inclined to evaluating newer issues unless the business is differentiated or there is a huge value cushion,” said Vikas Khattar, managing director and head of Equity Capital Markets and FSG coverage at Ambit.

The trend shows there is a reset in how Indian companies access capital. “At this stage, investors in general are more selective about IPOs, and within those, their preferences are tilted towards larger-sized issues. When the market starts recovering, the risk appetite for IPOs will increase again,” Khattar said, adding that there will, however, continue to be exceptions for smaller, good companies looking to go public, even in volatile market conditions.

With a variety of businesses coming to the market, it is advisable to be more selective when investing in IPOs, Raunak Onkar, fund manager and research head, PPFAS Mutual Fund, told Mint in an emailed statement. As of 31 March 2026, Parag Parikh Mutual Fund’s (PPFAS) total assets under management stood at over ₹1.47 trillion.

Valuation discipline

Onkar further explained that allocations are contingent on the issue's pricing at a reasonable valuation for that business and compared to already listed peers in the market (if any). “Some businesses that are global in nature can also provide a global valuation comparison if there are listed peers in the international markets,” Onkar said, adding that investors must be cautious and understand the business model of the IPO companies.

In 2021, select consumer and tech firms listed at roughly twice their prior valuations on average. By 2025, the average premium had moderated to about 20%, with several high-profile names even listing at discounts.

However, companies are still filing their papers despite slow momentum and are waiting to go public as soon as the market recovers, said Vikram Gawande of Blume Ventures, an early-stage venture capital firm which is a big proponent of companies tapping the public markets at an early stage. He added that niche plays as well as market leaders will continue to drive demand even with an issue size of ₹500-2,000 crore.

Companies relying on the public market to raise funds for growth or capital expenditure may evaluate options in the private markets. "For companies who need capital in the near term, conversations are beginning to emerge as they explore options to raise capital in private markets instead. At this stage, they're evaluating engagement with growth and private equity funds to meet their funding needs,” Gawande said.

Priyamvada C

Priyamvada is a Mumbai-based business journalist at Mint. She writes about the public and private markets with a key focus on venture capital, private equity, M&As and private credit. Her coverage also spans startups and emerging businesses.Over the last two years, she has uncovered some of the largest deals and interviewed important decision-makers from India’s investment ecosystem. She likes to dabble across different formats like long forms and explainers. Her work has been consistently displayed on the publication's deals page, and she has also written multiple front-page stories.Prior to joining Mint in 2024, she worked out of Reuters’ Bengaluru bureau where she extensively covered the travel, transportation, and logistics industries. Across both her stints, Priyamvada has displayed rigour for breaking news and analyzing interesting data-driven trends. She holds a postgraduate diploma from the Asian College of Journalism's Bloomberg programme. In her free time, she enjoys reading books and trying out different cuisines. She is keen to delve deeper into the various sectors she covers and is always up for a chat. You can reach out to her at priyamvada.c@livemint.com.