India’s equity capital markets are entering a new phase where volume is no longer the only story. The surge in stock listings over the past two years has begun to materially change how much companies are willing to pay to access public markets, pushing IPO underwriting fees to record levels and strengthening the pricing power of investment banks.

For much of the last decade, India’s IPO market was characterized by intense competition among bankers, razor-thin margins, and a race to win mandates largely on price. Even as deal volumes grew, fees remained compressed, particularly for large issuers that could dictate terms. That dynamic is now shifting.

According to data compiled by capital-markets provider LSEG and reported by Bloomberg, investment banks earned a record $417 million in underwriting fees from Indian IPOs last year. This milestone comes on the back of two consecutive years of all-time-high issuance, with India ranking among the busiest IPO markets globally in 2025.

Companies raised approximately ₹1.95 trillion ($21.6 billion) through IPOs in 2025, surpassing the previous year’s record of ₹1.73 trillion. Importantly, this expansion was not driven by a handful of mega deals but by a steady pipeline of listings across sectors and market capitalizations.

The most telling shift is in fee structure. The average fee paid to bankers for Indian IPOs rose to 1.86% of deal value, up from 1.67% a year earlier. This not only marks a sharp year-on-year increase but also places India above Hong Kong, where average IPO fees hover around 1.5%, despite Hong Kong’s longer-standing role as Asia’s financial hub.

Bankers attribute this improvement to a combination of sustained deal flow, broader participation from retail investors, consistent institutional demand, and regulatory reforms that have reduced friction in the listing process. Together, these factors have reduced the desperation to undercut competitors purely to win mandates.

Rising IPO fees are more than just good news for bankers’ profit pools. They indicate a deeper shift in how Indian companies view capital markets expertise. As Pratik Loonker, Managing Director at Axis Capital, noted, leading issuers are increasingly seeking long-term advisory partners rather than transaction-only distributors.

This evolution reflects a maturing ecosystem where issuers value pre-IPO positioning, equity storytelling, post-listing liquidity support, and ownership transition planning. Willingness to pay for these services suggests greater sophistication among promoters and boards, particularly in fast-scaling and consumer-facing businesses.

From a market perspective, healthier underwriting economics can also improve deal quality. When banks are not forced to compete solely on price, there is greater incentive to invest time and resources into valuation discipline, investor education, and post-listing stability.

Regulatory efforts over recent years to simplify disclosure norms, streamline approvals, and protect retail investors have indirectly supported this trend. While policymakers have not commented directly on fee levels, the consistency of IPO approvals and the depth of the pipeline suggest a stable policy environment that encourages listings without artificially suppressing intermediary economics.

The fee surge has had a visible impact on advisory league tables. Axis Bank emerged as the top IPO advisor by fees, earning $34.3 million, followed closely by Kotak Mahindra Bank Ltd. at $32.7 million. Mid-sized players also saw sharp growth, with IIFL Capital Services Ltd. reporting a 90% jump in fee income, while Motilal Oswal Financial Services Ltd. recorded a striking 396% surge.

For Indian markets, this trend reinforces the growing importance of capital market-led growth. Stronger advisory franchises can attract more issuers to public markets rather than private capital, improving transparency and broadening investment opportunities for domestic savers.

Sector-wise, financial services firms with strong investment banking arms stand to benefit disproportionately. Over time, this could encourage more banks and brokers to invest in advisory capabilities rather than relying purely on trading or distribution revenues.

Key risks include sudden equity market corrections, regulatory tightening around IPO pricing or disclosures, and over-reliance on retail participation. Additionally, while fees are rising, India remains a relatively low-fee market globally for large issuers, limiting how far pricing power can realistically extend without risking deal flow.