Mega IPOs: Big issue, small gains? HDB Financial’s Rs 12,500 cr offer faces a tough legacy

HDB Financial Services is set to launch its another mega IPO of Rs 12,500 on Wednesday, June 2025. In recent years, the Indian stock market has witnessed a flurry of mega IPOs, with several companies raising big money from Dalal Street. However, the performance of mega IPOs of Dalal Street has remained a mixed bad.

Despite the scale and initial market excitement, a significant number of these large IPOs have underperformed, failing to generate the expected returns for investors. Infact majority of the jumbo primary offerings, which have raised more than Rs 8,000 crore from primary markets have failed to deliver a decent listing pop to the investors.

Market participants believe that rich valuations and major offer-for-sale (OFS) components in the IPOs to give easy and mega exit to promoters or PE investors dampen the sentiments for mega IPOs. Also, mega IPOs remain less subscribed in overall terms, which also erode their sheen.

A growing trend among recent mega IPOs—those raising Rs 10,000 crore or more—is their inability to deliver strong post-listing returns to investors. Several key factors including a major chunk of offer-for-sale component for PE investors and rich valuations leaving little room for retailers have dented the performance, said Manick Wadhwa, Director of Strategy at SKI Capital services.

In the recent past the large size IPOs which have not provided big returns are in the field of Insurance and payment systems, said Jyoti Prakash Gadia, Managing Director at Resurgent India. Auto sector and the supply chain industry based on updated technologies and strong logistics also face market challenges, she said.

According to the data from Ace Equity, which analyzes issues on net-off the anchor book, daddy-IPOs of Hyundai Motors India, One97 Communications (Paytm), Life Insurance Corporation of India which raised Rs 18,000-28,000 crore were listed at a discount. All these three IPOs were booked only 2-3 times each.

India’s mega-IPOs have often arrived at moments of peak market optimism, but with surprisingly poor follow-through. It reflects a liquidity vacuum- massive IPOs absorb market capital, leaving little dry powder for secondary buying, said Jahol Prajapati, Research Analyst at SAMCO Securities. The sheer size of these issues often satisfies most of the initial demand during allotment, leaving limited incremental buying, he said.

Hyundai Motor India was listed in October 2024 at a discount of 1.5 per cent to Rs 1,931 over its issue price of Rs 1,960 apiece. Paytm debuted 9 per cent below its IPO price of Rs 2,150 at Rs 1,955, while LIC of India was listed at Rs 867.20, a discount of 9 per cent over its issue price of Rs 949.

However, Coal India, which was the first IPO to raise more than Rs 15,000 crore was an exception. The stock made its debut in November 2010 and was listed at Rs 287.75, a premium of nearly 17.5 per cent over its issue price of Rs 245 apiece. Eternal (formerly known as Zomato) was listed at a premium of Rs 51 per cent on July 21, while Vishal Mega Mat debuted with 41 per cent premium in December 2024.

SBI Cards, General Insurance Corporation of India, The New India Assurance Company, ICICI Lombard General Insurance Company, ICICI Prudential Life Insurance Company and NMDC were other mega issues which were listed at discount. NTPC, Hexaware Technologies, NTPC Green Energy and SBI Life Insurance Company were listed at a premium of less than five per cent.

Interestingly seven out of 24 mega IPOs of Dalal Street are trading below their IPO price. Reliance Power, which raised Rs 11,700 crore is down 86 per cent from its issue price of Rs 450. NMDC and The New India Assurance Company have crashed more than 75 per cent from their respective IPOs issue prices so far.

One97 Communications, General Insurance Corporation of India and Star Health and Allied Insurance Company are down more than 50 per cent from their respective IPO price. LIC of India is also currently below its issue price.

However, not all mega IPOs have emerged as wealth destroyers. Eternal (Zomato) has made its way into Nifty and the stock is up 235 per cent above its issue price. Power Grid, ICICI Lombard GIC, HDFC Life Insurance and SBI Life Insurance have gained 150-200 per cent from their IPO price so far. NHPC has also managed to deliver multibagger gains to the investors.

The lukewarm performance of recent mega IPOs offers valuable lessons for both companies and investors including the need for realistic pricing, profitability focus, and transparent governance, along with a vision to look beyond the initial buzz and carefully evaluate the fundamentals, said Bajaj Broking Research. The balance between ambition and sustainability will likely define the success of future large-scale listings, it said.

PB Fintech Ltd., ICICI Prudential Life Insurance Company, NTPC, Vishal Mega Mart and Coal India have gained more than 50 per cent over their respective IPO price so far. SBI Cards And Payment Services and Hexaware Technologies have also delivered double digits gains over their IPO prices so far.

Market participants believe that Street's expectations are high from the mega IPOs because of their large size and buzz. Living up to them is not easy.  Investors want a clear visibility of profitability, scalability, and return metrics. Mere size or brand recognition is no longer enough to justify lofty valuations.

"History suggests caution while size attracts headlines, it often signals market saturation rather than sustainable opportunity. The HDB IPO may well test whether this liquidity-squeeze effect remains alive. For discerning investors, the lesson is clear—size demands scrutiny, not blind excitement," said Jahol from SAMCO.

Mega IPOs tend to suck liquidity out of the secondary market, especially when multiple large offerings crowd the calendar. This dampens overall enthusiasm and puts pressure on broader market sentiment during the IPO window, Wadhwa said. "Upcoming issuers must move away from OFS-heavy structures and include a healthy mix of fresh capital to support growth, offering better prospects."  

With a proven business model and good track record of the promoters, upcoming mega IPOs can create success story taking into account potential of the financial services sector. Specific growth strategies and efficiency in operations over a sustainable period of time by the respective companies and the overall stability of the capital markets amidst current uncertainties, said Gadia.