MUMBAI: The era of sky-high IPO valuations appears to be losing steam. According to data from Prime Database, the average price-to-earnings (P/E) multiple of companies listed in 2026 has plunged nearly 40% to 41.7x from 69.5x in 2025, as volatile markets, subdued equity returns and growing investor caution force issuers to moderate their expectations.
The sharp decline comes even as India’s primary market has remained resilient despite geopolitical tensions, elevated crude oil prices and persistent volatility in equities.
Some of the biggest issuers in 2026, including Jio Platforms, the National Stock Exchange (NSE) and SBI Funds, have entered the market at relatively modest P/E multiples of 33x, 43x and 42x, respectively. Their weighted average earnings per share (EPS) stood at Rs 33.62, Rs 42.82 and Rs 13.39, respectively.
The contrast with 2025 is striking. New-age businesses such as Lenskart and Billionbrains Garage Ventures, the parent of Groww, commanded lofty P/E multiples of 522x and 81x, respectively, despite relatively low weighted average EPS of Rs 0.77 and Rs 1.23.
Market experts say that while IPOs continue to attract strong investor interest, issuers are increasingly willing to settle for lower valuations to ensure successful listings. Uncertainty in the secondary market has also made companies more cautious about aggressive pricing.
Investors, too, are becoming more discerning, placing greater emphasis on earnings, profitability and sustainable growth rather than paying hefty premiums for future potential.
Sunil Singhania, founder of Abakkus Asset Manager, attributed the decline partly to a change in the mix of companies entering the market. While 2025 saw several new-age businesses commanding premium valuations, 2026 has witnessed more companies with established and traditional business models going public at relatively moderate multiples.
He cautioned against attributing the entire correction to market volatility, pointing out that domestic equities had also faced significant turbulence in 2025 following US President Donald Trump’s tariff announcements and the India-Pakistan conflict.
Vinit Bolinjkar, head of research at Ventura Securities, said the moderation in IPO valuations reflects the broader derating of Indian equities. Several new-age companies that listed in 2025 were priced on expectations of strong future growth rather than prevailing earnings, resulting in elevated multiples.
However, the shift goes beyond the changing profile of issuers. It also reflects a more fundamental change in investor appetite after a prolonged period of disappointing equity returns.
A senior mutual fund official said fund managers have become increasingly reluctant to chase expensive IPOs after struggling to generate returns since the market’s uptrend reversed in late 2024.
The earlier enthusiasm for acquiring stakes in new businesses at almost any valuation has given way to closer scrutiny of earnings, growth prospects and the potential for listing gains.
The official said several companies tapping the market in 2026 have existing shareholders, including foreign portfolio investors (FPIs) and private equity funds, looking to monetise their holdings. The pressure to provide exits amid uncertain market conditions has also encouraged more realistic pricing.
Sunil Rohokale, promoter and chairman of Nivara Home Finance and former CEO and co-founder of ASK Investment, said the moderation reflects both the broader correction in equity valuations and a conscious effort by issuers to leave some gains on the table for investors.
With crude oil prices remaining elevated and the West Asia conflict continuing to unsettle global markets, investment bankers and issuers are likely to remain cautious about pushing valuations too aggressively.
Recognising the challenging environment, the Securities and Exchange Board of India (Sebi) has extended until March 2027 the relaxation allowing eligible issuers to revise their fresh issue size by up to 50% without filing fresh draft offer documents, subject to prescribed conditions.
Investors are giving a clear message: Companies seeking successful listings will increasingly have to balance their fundraising ambitions with the need to offer investors reasonable prospects of returns.
Source: The Financial Express
