For a sector once celebrated as the darling of Dalal Street, India’s non-banking financial companies (NBFCs) are suddenly facing an IPO hangover. What began as a flood of public listings with blockbuster subscriptions and day-one pops has now turned into a sluggish, uncertain pipeline. From HDB Financial Services’ lukewarm returns to Belstar and SK Finance watching their approvals lapse, NBFC IPOs are struggling to hold market attention.
Yet, in the shadows of this uncertainty, ace investors like Madhusudan Kela and Ashish Dhawan are quietly doubling down, betting that this is just a pause before the next big upcycle.
🎢 The IPO Rollercoaster: From SBFC’s 60% Pop to HDB’s Struggle
Recent NBFC IPOs tell a story of sharp contrasts.
- Winners:
- SBFC Finance was listed in August 2023 and rewarded investors with a whopping +61.7% on debut.
- Manba Finance and Northern Arc Capital also gave solid double-digit listing gains (+27% and +23% respectively).
- Strugglers:
- HDB Financial Services came with all the pedigree of the HDFC group. It listed at a premium, touched a high of INR 892 (nearly +20% over the issue price of INR 740), but then lost steam. Within days, it slipped below issue price to INR 732, and today languishes around INR 783 — just a modest +5.8% return after two months of struggle.
- Laxmi India Finance debuted with a –15% cut, while even big names like SBI Cards (2020) disappointed investors with a negative listing.
The message is clear: listing pops no longer guarantee sustained gains in the NBFC space.
⏳ Delays & Lapses: The NBFC IPOs Queue Stalls
If the secondary market is losing steam, the primary market isn’t faring any better.
- Belstar Microfinance → IPO approval lapsing on 30 August 2025.
- Avanse Financial Services → INR 3,500 Cr IPO delayed, approval lapsing 23 October 2025, thanks to weaker education loan demand after stricter US visa norms.
- SK Finance → INR 1,600 Cr IPO shelved, despite cutting valuations.
- Veritas Finance → INR 2,800 Cr IPO pushed back amid US tariffs hitting MSMEs.
- Hero Fincorp → IPO delayed.
- Tata Capital → The lone bright spot, likely to go public in September 2025, proves that large players still inspire investor confidence.
The contrast is stark: mid-tier NBFCs are running scared, while big-ticket names can still command market attention.
📉 Aye Finance: Profits Halved, IPO Plans on Ice
Take Aye Finance, for example. The SME-focused lender had SEBI’s nod for an INR 1,450 Cr IPO. But the June quarter (Q1 FY26) saw profits slump 50% YoY to INR 30.6 Cr on the back of rising impairment losses.
- Revenue still grew 21% YoY to INR 407 Cr, but expenses surged 39%.
- FY25 net profit had grown just 6% YoY to INR 171 Cr — modest compared to its topline growth of 41%.
No surprise then that Aye, despite having all approvals, is holding back. “Why risk a weak listing when market sentiment itself is against you?” seems to be the unspoken mantra.
🦸 Contrarians Step In: Dhawan & Kela’s Big Bets
Even as the public markets turn cautious, seasoned investors are smelling opportunity.
- Ashish Dhawan picked up a 2.2% stake in Northern Arc Capital (INR 60.9 Cr block deal), just months after the stock tanked 50% from its IPO highs.
- Madhusudan Kela doubled his stake in IndoStar Capital Finance (INR 203.8 Cr) and entered SG Finserve for the first time. IndoStar’s FY25 PAT jumped 64% YoY to INR 120 Cr, and AUM rose to INR 11,053 Cr as the company pivoted toward retail vehicle and SME loans.
What looks like weakness to retail investors is being seen as deep value by market veterans.
🧐 Why This Sluggishness? Analyst Take
The slowdown in NBFC IPOs is not a one-off — it’s the result of a cocktail of structural, regulatory, and market forces.
- Valuation Disconnect & OFS Overhang: Mid-tier NBFCs are valued at 12–15x earnings, while bellwethers like Bajaj Finance command 30x+ multiples. Investors are unwilling to pay premium prices for mid-tier risk. To make matters worse, many upcoming IPOs have been heavy on OFS components, where private equity funds exit. This creates a supply overhang and dampens enthusiasm for fresh listings.
- Rising Funding Costs: While AAA-rated issuers borrow cheaply, mid-tier NBFCs face higher spreads. Their cost of funds has remained stubborn even as government bond yields have cooled, compressing margins. Episodic bursts of bond market issuance in early 2025 provided short-term relief, but the structural gap remains.
- Regulatory Flux: The RBI’s flip-flops on risk weights (hiking in late 2023, rolling back in early 2025) created uncertainty. Add to this the strict rules on digital lending guarantees (DLG), capped at 5%, and ever-evolving norms around NBFC–AIF exposure, and the result is an unpredictable regulatory environment. Investors punish uncertainty with lower valuations.
- IPO Market Micro-structure Changes: Regulatory tweaks in the IPO process have altered market dynamics. The RBI’s cap on IPO financing leverage (INR 1 Cr per borrower) has reduced the frenzy of HNI bids that once drove oversubscriptions. Meanwhile, the T+3 listing cycle (effective December 2023) has shortened timelines for speculation, making it harder for momentum trades to build.
- Sector-Specific Macro Shocks: NBFCs focused on education finance are reeling from stricter US visa rules (Avanse), while those lending to MSMEs face demand weakness due to US tariffs (Veritas). Vehicle financiers and SME lenders face stiff competition from banks aggressively pushing retail credit.
- Weak Investor Appetite: Despite valuation cuts, IPOs like SK Finance couldn’t draw sufficient demand. Retail investors, burned by post-listing underperformance, remain cautious. Institutional anchors are selective, waiting for clarity before deploying large sums.
Bottom line: The sluggishness in NBFC IPOs is a story of valuation mismatch, high credit costs, policy uncertainty, market structure shifts, and weak investor psychology. For most boards, it is simply better to delay than risk a flop.
🔮 What Next for NBFC Sector?
The question now is: what needs to change for NBFC IPOs to regain momentum?
- Credit Costs Must Peak and Decline: Once Stage-3 assets stabilise and provisions normalise, profitability buffers (Pre-Provision Operating Profit vs credit costs) will widen again. This clarity is key to reviving market trust.
- Funding Spreads Must Narrow: Sustainable relief in bond markets — not just short bursts of issuance — is needed. If AA- and A-rated NBFCs can bring down their cost of funds relative to AAA peers, investors will reward them with higher multiples.
- Policy Clarity Without Whiplash: A consistent stance from the RBI on capital requirements, risk weights, and DLG norms would reduce the uncertainty premium that currently dogs valuations.
- A Bellwether IPO Must Succeed: All eyes are on Tata Capital’s IPO, expected in September 2025. A strong debut and stable post-listing performance could reset sentiment for the entire sector, proving that NBFC IPOs can still create value for investors.
- Niche Recovery Signals: Education loan demand normalising, MSME order books strengthening, and vehicle disbursements stabilising will serve as early signs that end-market stress is easing.
- Governance & Disclosure Playbook: NBFCs will need to get proactive — improving board independence, providing granular disclosure on asset quality cohorts, and limiting the OFS portion in IPOs. Market appetite is now strongly linked to governance signaling.
Investor Lens:
For investors, the focus should be on:
- Unit economics (NIM vs CoF, opex/AUM).
- Asset quality trajectory (Stage-2 migration, collection efficiency).
- Liability profile (bank lines vs bond dependence).
- Regulatory sensitivity (capital adequacy, reliance on guarantees).
Final Words
NBFC IPOs are in a holding pattern, but the sector is not broken. Once credit costs cool, regulatory clarity emerges, and a marquee IPO delivers confidence, the pipeline could re-open quickly. For now, the smart players — both companies and investors — are waiting on the sidelines, preparing for the next cycle
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