Valuation Bubble in New-Age Tech IPOs - Lessons from the Indian Market

-        By Shefali Sahu

In recent times, India has witnessed a highly dramatic surge in new tech IPOs. Following the first great wave in 2021–2022, many startups went public at stupendous valuations. The second wave of IPOs in 2024–2025 has been mixed in results, with some IPOs doing well and some doing badly. This widely used era has ultimately produced valuable insights for investors, founders, and regulators of beloved initial public offerings (IPOs) and a more robust market.

The High-Cost Tech IPO Boom

India's ten-year success in the digital economy can be attributed to several factors, including inexpensive data, digital payments, and a large population of tech-savvy young people. Large tech-age startups like Nykaa, Policybazaar, Paytm, and Zomato were eager to go public by 2021, following long-awaited IPOs. Although it is possible to argue that these outrageous IPO prices have given India's digital future hope, the precipitous drop in many stocks in the immediate aftermath of IPOs should have served as a reminder that investors' expectations were very different from the company's core values.

Following a lull, IPO momentum picked back up in 2024 thanks to the impending IPOs of startups Meesho and Pine Labs, Ola Electric, Ather Energy, and Swiggy. According to EY data, India raised $2.8 billion through 62 initial public offerings (IPOs) in Q1 2025, making up 22% of the global IPO volume. In 2024, India surpassed the United States and ascended to the position of the second-largest IPO market globally, with about 268 IPOs realizing revenues of ₹1.67 lakh crore.

The Data: Aspirations versus Facts

Investors and the media have been mesmerized by those mega numbers connected with India's recent IPO boom, but eventually, the conclusions from post-listing performances of many tech and innovative issues bring 2024, India surpassed the United States and ascended to the position of the second-largest IPO market globally with about 268 IPOs realizing revenues of ₹1.67 lakh crore. These events are a lesson on risk associated with trends to focus on without detailed evaluation of underlying principles.

A comprehensive Moneycontrol analysis has revealed that only 58% of the 101 IPOs since January 2024 are trading above their issue prices, which is slightly better than a toss of a coin. Even more telling is the fact that only 6% of these IPOs have doubled investors' money, highlighting how rare a large return is in recent times with most IPOs displaying spectacular demand on listing day.

• Zomato: Zomato's July 2021 IPO was the first major consumer technology listing in India and initially symbolized the growing digital economy of the nation. In just a few weeks, the stock soared nearly 100% as investors priced in aggressive expansion. However, during 2022–2023, Zomato shares fell below the IPO price and remained there for months due to worries about increasing losses, cash burn, and regulatory risks in food delivery markets. Volatility is a lesson on how fast euphoria can fade in case of fundamental disappointment; however, Zomato did manage a very slight window of recovery in the early 2025, helped by improved sentiment and profitability.

  

• Paytm: The biggest tech listing put up in India, Paytm's November 2021 IPO carried a valuation of over 1.4 lakh crore. Shares fell 27% after opening that day at ₹2,150, making it India's worst large-cap debut ever, owing to concerns about its exaggerated valuation and unclear path to profitability. By the end of 2023, the stock stood at more than 70% down from its issue price. Even in mid-2025, the stock remained roughly 60% below the IPO price after the RBI banned Paytm Payments Bank from onboarding new customers in January 2024, shocking its user base (active users reportedly fell from ~168 million to ~68 million). Paytm showed how a strong company can be destroyed by overhang and hazy finances.

• Nykaa: Nykaa made its debut as India's first noteworthy beauty e-commerce initial public offering (IPO) in November 2021. At that time, the shares were valued at a high ~6x GMV, which was even higher than the multiples that its international competitor, Sephora, was trading at. Nykaa's stock rose more than 90% on the day of listing, but selling pressure soon set in. Many factors contributed to its decline, including margin compression from aggressive discounting, investor skepticism about maintaining premium multiples, and slowing growth in online beauty as offline retail recovered from the pandemic. As of mid-2025, Nykaa's shares are roughly 50% below their initial public offering (IPO) price, demonstrating how aggressive valuations can backfire if growth slows or margins perform poorly.

• Ola Electric: In December 2024, the company raised ₹6,145 crore on the back of strong government support towards electric mobility, thereby becoming the largest IPO in the EV segment in India. The optimism was short-lived, though, as by June 2025, Ola's shares had dropped roughly 35% below the issue price. The stock's decline is a result of several factors, including concerns about product quality and delivery delays, growing cash burn, and increased competition from Ather, TVS, and Bajaj, which caused Ola's market share to plummet from roughly 50% in 2022 to about 11% by 2025. Ola's example shows how a first-mover advantage can be quickly eroded by subpar execution.

Sudden outlooks against IPOs are thus illustrative of a primary-market passion never manifested into long-term post-listing performance due to enormous listing-day demand, where IPOs are often oversubscribed dozens of times.

Why Did the Bubble Form?

• Comparing to Global Giants: When investment bankers are trying to pitch an Indian startup to the general public, several comparisons with Amazon, Uber, and Alibaba are put forth, despite glaring contrasts in consumer, competitive, and regulatory environments.

• Getting More Liquidity: Between 2020 and 2022, central banks from all around the world dipped down their rates, hence filling the liquidity in the markets. A record number of new demat accounts were opened by retail investors looking to make quick buck from IPOs.

• Premium Scarcity: There wasn’t many tech companies listed in India. In an attempt to participate in the "India digital story," investors flocked to new initial public offerings (IPOs), which caused valuations to rise.

• Aggressive Storytelling: IPO roadshows typically ignored profitability concerns in favor of focusing on prospective market size and future growth. Losses were presented as "investments" in growth in a number of IPO prospectuses.

Conclusion

India's experience with valuation bubbles in contemporary tech IPOs highlights a timeless truth: growth stories alone cannot justify astronomical valuations. Startups need to remember that market participants need to align expectations with fundamentals, regulators need to insist on transparent disclosures, and credibility endures beyond the day of the initial public offering (IPO).

As India establishes itself as one of the world's leading IPO markets, a shrewder strategy by all stakeholders can ensure that public markets finance the next wave of innovation, without repeating the mistakes of past bubbles.