India’s IPO Market Boom in 2025: Domestic Investors & Regulatory Reforms Fuel Growth

India’s IPO surge in 2025 is best understood as a structural inflection rather than a cyclical spike. The year saw record fundraising—mainboard IPOs alone mobilised about ₹1.75–₹1.76 lakh crore (~US$22 billion*) [2][3]—across 367 listings, including SMЕ issues [1][2]. Several large transactions dominated mainboard totals—e.g. the ₹15,512 crore Tata Capital issue and HDB Financial Services’ ₹12,500 crore IPO—yet activity was broad-based, with mid-size issuers scaling up and SME issuers increasingly accessing mainstream capital. [2]

Crucially, the composition of demand shifted toward domestic investors. Domestic institutions, insurers and retail investors now supply roughly 75 % of IPO capital, up from ~57 % in 2021 [3]. In contrast, foreign holdings in equities have dipped to multi-year lows (FPIs holding ~17 % in many major companies), even as foreign interest remains selective. [3][7]

Regulatory changes by SEBI—lowering minimum share sale thresholds for big IPOs, extending timelines to meet public float norms, simplifying approvals—have eased friction and made large-deal execution more feasible. [6] Together with macro factors like lower interest rates and strong domestic liquidity, this has reduced reliance on foreign capital and increased confidence among issuers. [4][3]

However, signs of overheating are visible: oversubscription rates for small IPOs have jumped; listing gains shrank (to ~10 % from ~30 % the prior year); average retail applications and subscription multiples have declined in SME segments [2]. Equity‐raisings via QIPs, follow-on offers and for‐sale deals (exits) have diminished, potentially reflecting valuation sensitivity among investors. [2]

Strategic implications: for issuers, the IPO window is favorable but timing, valuations and demand segmentation are critical. For investors and bankers, the power shift to domestic capital markets suggests more stable funding but also intensifies competition and pricing discipline. Market participants should monitor foreign policy, global capital flows, and SEBI’s regulatory adjustments, which could either amplify or constrain momentum.

Open questions include sustainability of this domestic demand (especially from retail), how IPO pricing will evolve under greater institutional dominance, and whether public market reforms will keep pace with faster issuance pace. Also, whether secondary market performance will meet investor expectations—and if foreign investor sentiment will recover enough to diversify the demand base again.