Mutual funds invest nearly Rs 20,000 crore in IPOs in 2025, large issues dominate

Mutual funds (MFs) have invested around Rs 22,750 crore in initial public offerings (IPOs) so far in 2025, accounting for nearly 19 percent of the total Rs 1.22 lakh crore raised from the primary market this year, according to data from Prime Database.

Fund houses deployed Rs 15,158 crore through anchor investments and another Rs 7,590 crore in the Qualified Institutional Buyer (QIB, non-anchor) segment between January and mid-October. Strong Systmatic Investment Plan (SIP) inflows, averaging over Rs 20,000 crore per month and overall inflows into funds have provided ample liquidity for MFs to participate in large offerings, even amid mixed foreign investor flows.

The five largest IPOs of the year  — Tata Capital (Rs 15,511.9 crore), HDB Financial Services (Rs 12,500 crore), LG Electronics India (Rs 11,604.7 crore), Hexaware Technologies (Rs 8,750 crore), and Ather Energy (Rs 2,980.8 crore) — together accounted for 42 percent of total proceeds and absorbed nearly 44 percent of MF investments.

Hexaware Technologies attracted Rs 3,548 crore from funds, around 40.5 percent of its issue, while Ather Energy received Rs 1,379 crore. Tata Capital, HDB Financial Services, and LG Electronics India each saw allocations between Rs 1,800 crore and Rs 2,200 crore. Other significant allocations included Anthem Biosciences (Rs 738 crore), Schloss Bangalore (Rs 839 crore), and JSW Cement (Rs 656 crore), bringing MF investments in just eight issues to over Rs 8,000 crore.

At the smaller end, 32 IPOs (mostly below Rs 400 crore) drew negligible or no fund interest. Companies such as Denta Water & Infra Solutions, Scoda Tubes, Glottis Ltd, and Advance Agrolife did not receive any anchor or QIB allocation.

MFs reshape IPO landscape

Experts agree that there is a structural shift in India’s primary market due to growing MF  participation. “Earlier, IPOs were largely dependent on foreign portfolio investors (FPIs). Whenever FPI sentiment was weak, the primary market would typically stall. But with the steady liquidity that MFs are now receiving every month and the sizeable cash they hold, their participation has expanded meaningfully in both the secondary and primary markets,” Pranav Haldea, Managing Director of Prime Database, explained. He added that MFs are also having a noticeable impact on price discovery. By analysing the fundamentals of Indian companies, MFs help ensure that IPO prices are more closely aligned with intrinsic valuations.

Sectoral trends and emerging patterns

The dominance of information technology (IT) and financial services remains evident, with these sectors together attracting about Rs 9,100 crore, or roughly 40 percent of total MF investment in IPOs so far this year.

Within the IT and digital businesses, Hexaware Technologies, Anthem Biosciences, and Aditya Infotech together drew around Rs 4,590 crore from MFs across both anchor and QIB portions.

Financial services companies, such as Tata Capital, HDB Financial Services, and Urban Co, added another Rs 4,480 crore.

Beyond these dominant sectors, consumer and renewable-energy companies—led by Ather Energy, Vikram Solar, and Saatvik Green Energy—accounted for about Rs 2,400 crore, while industrial and materials firms including JSW Cement, Belrise Industries, and Schloss Bangalore contributed nearly Rs 1,800 crore.

Haldea also added that MF participation is slowly becoming increasingly inclusive as many family-run, promoter-led businesses from traditional, non-financial sectors have come to the market with modest-sized IPOs. “So, while anchor allocations tend to be higher for larger issues simply because of size, MFs are now participating across sectors and company sizes, not just in the big names,” he said.

Experts suggest that with more IPOs in the pipeline, MF interest is yet to dim. “Given the steady inflows, MFs have to deploy capital, and new paper of IPOs are a natural avenue for that. There is a robust pipeline of companies preparing to list. Around 200 are either approved by the Securities and Exchange Board of India (Sebi) or awaiting approval. So the supply side is strong. IPOs offer exposure to new sectors and business models which has helped in broadening the investment options considerably,” Haldea said.

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