Companies planning public offerings are largely choosing to wait for better market conditions rather than resize offerings, as valuation expectations continue to weigh on launch decisions amid volatile markets.
In April, the markets regulator SEBI allowed companies to reduce IPO sizes by up to 50 per cent without refiling offer documents to help companies navigate a period of heightened market volatility and uncertain investor sentiment.
However, advisers said issue size remains one of the last variables companies are willing to revisit.
“Currently, we do not anticipate issuers to substantially alter their IPO size,” said Sourav Modi, Partner, JSA Advocates & Solicitors. “The macroeconomic conditions coupled with the valuation expectations of the issuers and investors not aligning in current market conditions makes it more challenging to approach the market through IPOs.”
Sahil Bora, Partner at JSR Capital Advisors said that a significant number of promoter groups, private equity investors and pre-IPO shareholders continue to anchor their expectations to the strong market conditions seen between 2021 and early 2025, when liquidity was abundant, public market multiples were elevated and IPO markets remained supportive.
However, the current market environment has changed meaningfully. “For certain PE and pre-IPO investors, accepting lower valuation multiples can materially impact expected returns, particularly where entry valuations were established during a more euphoric market phase,” Bora said.
As a result, many issuers are choosing to reassess launch plans rather than compromise on valuations unless market conditions leave them with limited alternatives.
“Most companies would still prefer to wait for better market conditions rather than reduce issue size too early, because a visible cut can be interpreted as weak demand,” said Soumya Singh, Co-founding Partner, Thistle & Law.
A reduction in issue size can affect offer-for-sale proceeds, secondary sales, alter transaction economics and create a lower public-market benchmark for future exits, Singh said.
Companies are rather accessing anchor investor demand, institutional feedback, valuation support, offer-for-sale quantum, pricing considerations and launch timing before revisiting issue size.
Validity extension
SEBI also extended the validity of observation letters, which usually expire within 12 months, providing companies additional time to tap the capital markets. So far over 30 companies have held back their IPO launches beyond the 12 month approval period.
The primary market has seen a slowdown in mainboard launches over the past two months as geopolitical tensions, global market volatility and weakened investor sentiment weighed on issuance plans.
In some cases, investor-shareholder agreements may require exits within defined timelines, while certain funds nearing the end of their investment cycle may seek liquidity despite softer market conditions. Sector outlook and company-specific funding requirements can also influence launch decisions.
The measures still provide issuers with greater flexibility in planning launches, particularly if market conditions remain volatile closer to execution. With the reelaxations being available until September, many companies are expected to continue monitoring investor appetite, market sentiment and the performance of upcoming public issues before taking final decisions on their offerings.