Startup IPOs Flood Market Amid Declining Stock Prices: A Look at the Current Landscape
Even as a wave of startups rushes to list on Dalal Street, many established companies are struggling, with their stock prices falling below initial public offering (IPO) levels. This trend raises concerns about the long-term value these firms can deliver to investors. Notably, several high-profile startups, including Swiggy, FirstCry, Paytm, Ola Electric, and Delhivery, are currently trading below their offer prices. Analysts attribute this decline to market volatility and disappointing growth, which has not met investor expectations.
Startups Struggle in a Volatile Market
The recent surge of startups entering the public market has not translated into sustained investor confidence. Data from exchanges and Prime Database reveals that nearly ten startups are trading below their IPO prices. Analysts suggest that while market fluctuations contribute to this trend, the primary issue lies in the lackluster growth of these companies. Nikunj Doshi from Bay Capital noted that investor disappointment stems from a realization that performance is not aligning with expectations. Many startups have relied on acquisitions to boost their top-line growth, but it remains uncertain whether these strategies will positively impact their bottom lines.
Since 2021, over 30 startups have made their market debuts, encouraged by favorable regulatory conditions and attractive public market valuations. This trend has led to a shift away from larger private fundraising efforts. Following the successful listings of billion-dollar startups like Lenskart, Groww, and Meesho, other companies such as PhonePe, Zepto, Oyo, and Flipkart are preparing for their own IPOs in 2026.
Investor Sentiment and Lock-In Periods
While many recently listed startups are performing well, analysts caution that their true performance should be assessed six months post-listing. This period is critical as it marks the expiration of lock-in periods for venture capital, private equity, and high-net-worth investors. Once these restrictions lift, a surge in share supply can occur, potentially leading to price corrections. Doshi pointed out that some startups have already experienced declines in their stock prices after the six-month mark, indicating that the initial excitement may not be sustainable.
The lock-in expiry is a significant event in the market, as it allows shareholders to sell their stakes freely. This increase in available shares can overwhelm the secondary market, making it challenging for prices to hold steady. Investors are advised to remain cautious as they navigate this landscape.
Changing Valuations for Tech Companies
Public market valuations for technology-driven businesses have undergone a significant reset from their previous highs. For example, high-quality Software as a Service (SaaS) companies that once traded at mid-teens revenue multiples are now facing much lower market benchmarks. Mehekka Oberoi, a fund manager at IIFL Fintech Fund, explained that this shift reflects both a compression of multiples and a slowdown in growth rates compared to earlier expectations.
As the next wave of startups prepares to enter the market, they may need to adjust their valuation strategies, potentially listing at lower valuations than those achieved in their last private funding rounds. This trend highlights the evolving landscape of startup financing and the challenges that lie ahead for new entrants in the public market.
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