Primary markets see a slow start to 2025 amid increased volatility

In the three months ended 31 March, funds raised by listed firms via qualified institutional placements (QIPs) fell by nearly three-fourths sequentially and by almost a fourth year-on-year (y-o-y) to ₹14,048 crore, showed data from market research platform Prime Database. 

Companies had raised ₹49,479 crore in the December quarter and ₹18,357 crore in the corresponding quarter of 2024 via QIPs.

The number of issuers, too, has nearly halved. Only eleven companies carried out QIPs in the first quarter of 2025, compared to 28 companies in the fourth quarter and 21 in the first quarter of 2024.

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In the whole 2024, as of 28 December, companies had raised ₹1,37,560 crore via 95 QIPs, compared to ₹54,350 crore from 45 issues a year earlier.

Other primary market routes, such as rights issues, saw fundraising worth ₹1,881 crore in the year's first three months. There were no follow-on public offers (FPOs) during this period. 

A QIP is when a listed company raises capital by issuing shares only to qualified institutional buyers. A rights issue is when a company offers existing shareholders the right to buy additional shares at a discount in proportion to their holdings.

Correcting their ways

The primary reason for the slowdown is that promoters are reluctant to dilute stakes during the bear market, according to experts. 

To be sure, when markets correct, a company has to issue more shares to raise the desired amount, i.e., less money for selling more stakes. 

“Companies prefer to raise funds at valuations where dilution will be minimal, but the current market volatility has made it difficult," said V. Prashant Rao, director at Anand Rathi Advisors Ltd.

“With market corrections, companies will have to raise funds at lower valuations, so they often delay until there's more stability and predictability to the markets," he added.

The Nifty 50 surged 18.8% from 1 January 2024 to 26 September 2024 before it started correcting. As of 30 April, it was down 5.72% from the 26 September peak. Overall, it rose 8.8% in 2024 and has fallen 0.53% in the March quarter of 2025.

In volatile markets, investors prioritise protecting existing portfolios over exploring new opportunities like an initial public offering (IPO) or a QIP, said Vikas Khattar, managing director and co-head of investment banking and head of equity capital markets at Ambit.

If investors believe in the long-term potential of their holdings, they may double down rather than invest in new IPOs or QIPs, which require evaluating both the business model and the pricing, said a banker on the condition of anonymity. 

For perspective, the number of public issues fell by almost a fourth y-o-y to 63, in the March quarter, showed an 9 April EY report. However, these companies raised $2.8 billion together—up 12% y-o-y. 

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Hexaware Technologies Ltd had the biggest IPO in the quarter, raising $1 billion in February. 

India accounted for 22%—the most—of the total IPOs globally in the first three months of 2025. In terms of amount raised, the US topped the list with a 33% share, while India was in fourth place with a 10% share.

A total of 91 companies went public and raised ₹1.5 trillion in 2024, according to Prime Database data.

What’s next?

Investment bankers believe that QIPs will pick up once the equity markets stabilise.

Meanwhile, the QIP activity will likely remain subdued in the June quarter. “A few issues may happen, but broader activity is expected only post this quarter, hopefully when conditions improve," said Rao.

Given the uncertainty induced by US President Donald Trump's resolve to hike tariffs, companies are recalibrating their positions in the new trade order, and so are investors, said Bhavesh Shah, managing director, head of investment banking, Equirus Capital.

Fundraising activity will resume once there is clarity and the markets regain some balance. In addition to the banking, financial services, and insurance sector, healthcare and domestic consumption stories could be the themes around which fundraising could be centred, he added.

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