India has been one of its busiest IPO markets in recent years. New companies are listing almost every week. Many issues are subscribed 50 times, 100 times, even 200 times. Listing-day gains often make headlines.
But before applying for the next IPO, investors may need to ask a basic question. Where is the money really going?
According to a detailed study by 1 Finance Magazine, which analysed more than 1,700 IPOs between 2015 and 2025, 63% of total IPO proceeds now come from Offer for Sale. Only 37% is fresh capital raised for business growth.
In simple terms, most IPO money today is going to existing shareholders who are selling their stake.
FROM GROWTH FUNDING TO EXIT FUNDING
A decade ago, IPOs were largely about raising money to expand businesses. Companies used the funds to build factories, reduce debt or enter new markets. Since 2015, a larger share of IPO money went into fresh issues.
That balance has now shifted.
The magazine explains that IPOs serve different purposes. Some are meant to fund growth. Others allow promoters and early investors to exit.
“The structure takeaway is not that one issue structure is inherently superior. IPOs serve different purposes. Some primarily fund growth, others primarily facilitate exits,” the magazine notes.
The issue is not whether Offer for Sale is good or bad. The issue is that many retail investors may not realise that when they apply, they are often buying shares from someone who is reducing exposure, not necessarily putting money into the company.
When the IPO is mostly fresh issue, the company’s balance sheet improves. When it is mostly Offer for Sale, ownership changes hands but no new capital enters the business.
LISTING GAINS LOOK STRONG, BUT THEY FADE
The data shows a clear pattern across IPO structures.
Fresh-issue-heavy IPOs deliver median listing gains of around 6.7%. But within one month, median returns fall to negative 8%. After one year, median returns decline further to around negative 13%.
OFS-heavy IPOs show stronger listing gains of about 11%. Yet one-month median returns fall to around negative 4%, and one-year median returns settle near negative 10%.
The message is simple. Early excitement often does not last.
The magazine clearly states that listing-day gains do not reliably translate into strong long-term performance.
This means investors who focus only on the listing pop may ignore what happens after the first few weeks.
WHEN SUBSCRIPTION SIGNALS DEMAND, AND WHEN IT SIGNALS EXCESS
High subscription numbers are often seen as proof of quality. But the study shows that demand alone does not guarantee better outcomes.
IPOs subscribed more than 200 times show median listing gains of around 90%. However, within one month, median returns fall to about negative 7%. One-year outcomes are mixed and not consistently strong.
The magazine explains that intense oversubscription reflects strong demand and liquidity in the market. It does not automatically mean the business is stronger or better priced.
In many cases, heavy demand creates very high expectations. When those expectations are not met, prices adjust.
In contrast, IPOs with lower subscription levels often see more moderate listing gains and less dramatic swings.
IPOs FOLLOW BULL MARKETS, THEY DO NOT LEAD THEM
The study also shows that IPO activity rises after strong equity market performance.
Charts tracking IPO issuance against 12-month Nifty returns show that more companies come to market after periods of strong returns. When markets are rising and valuations are high, promoters and investors are more willing to sell.
This suggests that IPO waves are part of the broader market cycle.
Companies usually list when investor sentiment is positive and liquidity is abundant. That is when pricing power is strongest.
For retail investors, this means that IPO booms often coincide with peak optimism.
DOMESTIC LIQUIDITY IS DRIVING THE IPO SURGE
Another key finding is that IPO fundraising tracks domestic liquidity more closely than foreign flows.
Steady inflows into mutual funds and rising retail participation have supported the sharp increase in IPO volumes. The Indian investor base is now deep enough to absorb large supply.
This explains why annual IPO listings have surged sharply in recent years compared to earlier periods.
In short, Indian investors are largely funding this IPO wave.
SECTOR SHIFT REFLECTS THE ECONOMIC CYCLE
The study also highlights a change in the type of companies going public.
Between 2015 and 2019, IPO activity was led by financial services, consumer companies and technology-linked businesses.
After 2021, the mix shifted. Industrials, manufacturing and infrastructure-related companies began to dominate listings. This reflects India’s capital expenditure cycle and infrastructure push.
The magazine notes that this change is not random. IPO sectors tend to mirror broader economic trends. When credit growth and infrastructure spending rise, more such companies tap the market.
This shows that IPO activity is closely linked to where the economy is in its cycle.
NOT ALL STRUCTURES BEHAVE THE SAME
The magazine also compares very high fresh-issue IPOs, very high OFS IPOs and mixed-structure IPOs.
Mixed-issue IPOs often show more balanced performance across time periods. Fresh-issue-heavy IPOs may start modestly but sometimes hold up better if growth materialises. OFS-heavy IPOs tend to show stronger early gains, but post-listing weakness can be sharper.
The broader takeaway is not that one format is always better. It is that the purpose behind the IPO matters.
IS YOUR MONEY BUILDING THE BUSINESS OR FUNDING AN EXIT?
Animesh Hardia, Editor-in-Chief of 1 Finance Magazine, sums up the risk clearly.
“The listing pop feels rewarding, but the data shows it fades fast,” he says.
He adds that investors need to ask a simple question before applying. Is the capital building the business, or is someone cashing out?
That question changes the entire investment decision.
The study does not say IPOs are bad investments. It does not suggest investors should avoid them altogether.
It shows that structure, timing and purpose matter more than hype.
Strong listing gains can disappear within months. High subscription does not guarantee long-term returns. And a large part of IPO money today goes to existing shareholders, not into company growth.
For retail investors, the real issue is not whether an IPO is popular. It is whether the business is worth owning beyond the first day.
Before chasing the next 200-times subscribed issue, it may be worth pausing and asking who is on the other side of the trade.
Because when you invest in an IPO today, your money may be funding the promoter, not the company.
