India ECM 2025: IPO Boom Masks Sharp Drop in Capital Raising — What 2026 Holds

The ECM landscape in India during 2025 was marked by a clear divergence: on one hand IPO activity surged to record levels, while on the other broader ECM metrics—chiefly follow-ons and sell-downs—experienced steep contractions. Overall ECM fundraising dropped from ≈₹6.1 trillion in 2024 to ~₹5.1 trillion in 2025, even as IPOs stood out as an outperformer. The fall in follow-ons (down 53%), and in sell-downs, illustrates a retrenchment in secondary equity activity.

In IPOs, institutional demand was increasingly led by domestic players: DIIs made up roughly 60% of anchor book subscriptions in 2025, up from 40% in 2024. New-age tech IPOs stood out with average listing gains of ~38%, more than three times the broader IPO average. Large IPOs (issue size > ₹3,000 crore) saw listing gains near 19%, versus about 9% for smaller issues. These numbers suggest premium returns remain achievable for high-quality, large-cap and tech-oriented issuers.

However, beneath the headline growth lies a shift in IPO character and investor behaviour. Almost one-third of IPO proceeds in 2025 were OFS (promoter or investor exits) rather than fresh capital for business expansion. Capital allocated to expansion/new projects dropped to ~19% in 2025 from ~25% in 2021, while debt repayment rose to ~32%. Also, the post-listing performance of many IPOs has weakened; a growing share now trades at or below issue price. These trends indicate maturity in the market, increased investor selectivity, and possibly fading speculative fervour.

Looking forward, Kotak (per V. Jayasankar) anticipates a recovery in 2026. Forecasts include total ECM raising reaching ~$70 billion, with IPOs around $25 billion, block deals rebounding (especially as exit opportunities for promoters and private equity reopen), and QIPs modestly improving from 2025 levels, though unlikely to match 2024’s exceptional volumes. Drivers will include improving valuations, more stable macroeconomic and policy environment, and better corporate earnings.

Strategic implications: investment bankers may need to pivot toward IPOs, especially tech and large-cap issues, while managing risk from promoters using markets for balance‐sheet repair rather than growth. There may also be opportunities in structuring OFS and exit-focused IPOs carefully. The slipping follow-on activity suggests constraints in incremental capital demand or pricing challenges for secondary offerings. Open questions revolve around whether 2026’s optimism is justified—do valuation discounts, foreign investor interest and economic momentum suffice to restore broader ECM segments?