Bigger bids, fewer bets: mutual funds get selective in IPO market

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Rising systematic investment plan (SIP) inflows are swelling mutual funds’ investible pools, but a crowded primary market is leaving them competing for a narrower set of large, high-conviction deals.
According to data from the Association of Mutual Funds in India (Amfi), SIP contributions hit a record ₹32,490 crore in September, while equity mutual fund inflows rose 30.6% month-on-month.
SIP inflows hit an all-time high of ₹32,297 crore in August as well. In FY26, SIP contributions rose 20.8% year-on-year to ₹3.50 trillion.
“Because of the market outlook, geopolitical instability, the war and other factors, a lot of investors held back cash for a while,” said Amit Ramchandani, CEO and head of investment banking, Motilal Oswal. "Many funds were sitting on large cash positions of 5-6%. Over the past four to six months, that cash has started to get deployed.
“All the larger funds have been aggressive and are deploying money in core sectors such as financial services, manufacturing and new-age IT. Bids of ₹1,500 crore to ₹2,000 crore are becoming common,” Ramchandani added,
However, large bids do not necessarily translate into equally large allocations. In heavily subscribed transactions, funds may receive only a fraction of the shares they seek as they compete with other institutional investors.
“Mutual fund participation in the primary market has increased materially over the last 6–12 months, both in absolute quantum and in the size of individual commitments,” said Richa Choudhary, partner, Capital Markets Practice at Trilegal. “This is part of a broader structural increase in the role of domestic institutional capital in India’s equity markets.”
“The size of the cheques and the ability of large AMCs to take meaningful positions have increased. We are seeing large fund houses increasingly willing to deploy substantial amounts where they have conviction, particularly in larger IPOs and QIPs.”
Bulging bids
With large transactions attracting concentrated institutional demand, bids are often several times the size of the deal itself.
In August, during the government's offer for sale (OFS) of up to 6.5% of its stake in Life Insurance Corp. (LIC), mutual funds placed sizeable bids.
According to people familiar with the transaction, one mutual fund house bid ₹12,000 crore and another large fund bid ₹7,000 crore. Mint could not independently confirm the names of the respective fund houses.
The size of the OFS was ₹31,552 crore, with domestic MFs accounting for roughly 76.5% of the total OFS allocation, raising their combined ownership in LIC from under 1% at the end of July to about 5.4% by the end of August. ICICI Prudential Mutual Fund (MF) and SBI MF together acquired shares worth ₹17,145 crore, said a report by Business Standard.
Piramal Finance’s ₹2,100-crore transaction, also in August, drew bids of up to ₹20,000 crore amid strong interest from large mutual fund houses.
A report by The Economic Times in August also cited heavy bidding by large Indian mutual fund houses alongside global investors like Blackrock and Goldman Sachs.
At APAR Industries, two people told Mint that three funds bid around ₹2,000 crore each for a ₹2,500-crore QIP transaction in August.
Queries sent to LIC, Piramal Finance and APAR Industries did not elicit a response at the time of publishing the story.
Large deals attract institutional capital
The preference for large transactions is also reshaping the primary market, as fund managers look for deals that can absorb substantial capital without compromising liquidity or valuation discipline.
Issues involving companies with market capitalisations below ₹2,000 crore are finding it particularly difficult to attract institutional demand. Large fund houses, including SBI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund, Kotak Mahindra Mutual Fund and Nippon India Mutual Fund, have been actively deploying capital, but their participation is increasingly concentrated in high-conviction offerings.
“The largest fund houses are concentrating capital in transactions that offer sufficient scale, liquidity, quality of business and valuation comfort,” Choudhary said. “For example, of the 30 IPOs backed by the five largest mutual fund houses in CY2026, 19 had issue sizes of ₹1,000 crore or more, while only one had an issue size below ₹500 crore.”
While domestic institutional capital has become more abundant, mutual funds remain selective in their deployment, with a discernible preference for larger transactions, she added.
This selectivity comes as several new-age companies have had to reconsider their IPO plans. PhonePe and Zepto, for instance, have cut their proposed issue sizes and accepted lower valuations during IPO planning. PhonePe and Zepto, for instance, deferred listing plans amid severe mismatch in valuation expectations. Others like Turtlemint and Shadowfax are listed at a lower-than-expected valuation, on the back of certain weak listings in the sector in the past.
“We treat IPOs, QIPs and OFS on a case-by-case basis and do not view them as a general opportunity," said Satish Ramanathan, CIO - equity, JM Financial Asset Management.
He evaluates whether a transaction would increase an existing holding or introduce a new one, the underlying business, the fund's existing allocation to the company or sector, growth projections and the promoter's track record.
Hari Shyamsunder, vice president & senior institutional portfolio manager - India Equities, Templeton Global Investments, believes that some parts of the Indian markets have now entered “value territory”, despite headline returns remaining negative over the past two years.
“Stocks where valuation premiums have deflated faster than earnings have deteriorated” are creating value opportunities, Shyamsunder said. He sees this most clearly in financials, including banks and select non-banking financial companies (NBFCs), real estate and technology. Selective opportunities are also emerging in consumption, he added.
He looks for durable earnings growth, cash-generation ability, the promoter’s background and capital-allocation track record, including the years before listing. “Sizing follows conviction, deal structure, liquidity and current portfolio exposures."
An anchor bid, he added, comes together only when these factors align and the valuation is at a discount to intrinsic value. “If the valuations are rich, we pass. This process has kept us selective about IPOs, QIPs and OFS alike.”
This comes at a time when growth in domestic savings and mutual-fund assets has created a much deeper pool of domestic institutional liquidity.
“There is a greater willingness among domestic institutions to participate in primary-market opportunities as a core part of their equity allocation strategy. The strong listing performance of (certain) IPOs has also reinforced that appetite,” Choudhary added.

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