Even as a wave of startups rushes to list on Dalal Street, many established companies are facing challenges, 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 shows that nearly ten startups are trading below their IPO prices. Analysts suggest that while market fluctuations contribute to this trend, the primary issue is the lack of robust growth among these companies. Nikunj Doshi from Bay Capital noted that investor disappointment arises from a realization that performance is not aligning with expectations. Many startups have depended on acquisitions to increase their top-line growth, but it remains unclear whether these strategies will positively affect their bottom lines.
Since 2021, over 30 startups have made their market debuts, spurred by favorable regulatory conditions and appealing public market valuations. This has caused 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 gearing up for their own IPOs in 2026.
Investor Sentiment and Lock-In Periods
While many recently listed startups show promising performance, analysts warn that their true performance should be closely evaluated six months post-listing. This timeframe 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 happen, possibly leading to price corrections. Doshi highlighted that some startups have already seen declines in their stock prices after the six-month mark, indicating that initial excitement may not be sustainable.
The expiry of lock-in periods is a significant event in the market, allowing shareholders to sell their stakes freely. This increase in available shares can potentially overwhelm the secondary market, making it difficult for prices to maintain stability. Investors are advised to exercise caution in navigating this landscape.
Changing Valuations for Tech Companies
Public market valuations for technology-driven businesses have undergone a notable reset from their previous highs. For instance, 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 gears up to enter the market, they may need to re-evaluate their valuation strategies, potentially listing at lower valuations than those achieved in previous private funding rounds. This trend underscores the evolving landscape of startup financing and the challenges that await new entrants in the public market.
Digihunt is not a financial advisor and this is not investment advice.