India's Evolving IPO Market: A Shift from Price Competition to Value-Added Services

India's IPO market has undergone a profound transformation in recent years, marked by a shift from aggressive price competition to a focus on value-added services. This evolution is evident in rising underwriting fees, improved deal discipline, and the emergence of long-term advisory relationships between investment banks and issuers. These trends signal a maturing capital market, where investor sophistication and regulatory rigor are reshaping the dynamics of public offerings.

Surge in IPO Volumes and Underwriting Fees

The Indian IPO market has witnessed unprecedented growth, with fundraising volumes surging from USD 6,000 million in 2023 to USD 16,000 million in 2024, and further expanding in 2025. By year-to-date (YTD) 2025, total IPO fees had reached USD 328 million, surpassing the previous record of USD 270 million in 2021. This growth is driven by a robust domestic investor base, with 75% of IPO investments in 2025 originating from Indian sources, up from 57% in 2021.

While underwriting fees in India have historically lagged behind global averages (5%-7% in the U.S. and 2.5%-4% in Western Europe), the average fee in 2025 rose to 1.8%, as reported by LSEG. This increase reflects a broader industry trend: investment banks are now prioritizing quality over quantity, offering tailored advisory services to justify higher fees. For instance, large private sector deals command fees at the upper end of the 1%-2.5% range, underscoring the value investors place on expertise in navigating complex regulatory and market environments.

Improved Deal Discipline and Investor Rationality

The maturation of India's IPO market is also evident in improved deal discipline. In 2025, the average listing gain for IPOs dropped to 9.1%, a sharp decline from 30.25% in 2024. This shift reflects a more valuation-sensitive investor base, particularly among retail and institutional players, who now scrutinize fundamentals and governance practices before committing capital.

Tech IPOs, once a dominant force, saw a 10% year-over-year decline in fundraising to USD 3.8 billion in 2025, as investors grew wary of high-valuation startups. Social media backlash against overpriced offerings further reinforced a culture of caution. According to a Bloomberg report, this rationalization has led to a focus on sustainable value creation rather than speculative gains. For example, the Securities and Exchange Board of India (SEBI) now mandates detailed risk disclosures, with 46% of its observations centered on risk factors. Such measures have enhanced transparency, aligning issuer expectations with investor demands.

Strategic Long-Term Advisory Relationships

A defining feature of India's evolving IPO landscape is the rise of long-term advisory relationships. Investment banks are no longer confined to underwriting roles; they are increasingly engaged in strategic advisory, helping companies refine business models, optimize capital structures, and navigate regulatory hurdles. This shift is driven by the growing complexity of IPOs, including fast-track listings for foreign-owned subsidiaries and reverse flipping reforms.

For instance, Wall Street firms like Citi and JPMorgan have secured significant shares of the deal pipeline by offering cross-border expertise, while domestic players such as Axis Bank and Kotak Mahindra have strengthened their reputations through consistent execution. The result is a more collaborative ecosystem where banks and issuers co-create value, fostering trust and long-term partnerships.

Implications for Market Efficiency and Investor Returns

The transition from price competition to value-added services has far-reaching implications. For investors, improved due diligence and governance scrutiny reduce the risk of overpriced listings, enhancing long-term returns. For banks, higher fees and strategic advisory roles create recurring revenue streams, insulating them from cyclical market volatility.

Moreover, the emphasis on domestic capital-supported by a growing retail investor base and institutional allocations to equity-linked products-has made India's IPO market less reliant on foreign inflows. This self-sustaining dynamic, coupled with regulatory reforms, positions the market to weather macroeconomic headwinds while maintaining growth momentum.

Conclusion

India's IPO market is no longer a frontier of speculative frenzy but a testament to disciplined capital allocation and strategic value creation. Rising underwriting fees, improved deal discipline, and long-term advisory relationships collectively signal a maturing ecosystem where quality trumps cost. As the market continues to evolve, stakeholders-investors, banks, and regulators-must remain attuned to the interplay between innovation and prudence, ensuring that India's capital markets remain a beacon of efficiency and resilience.