Many high-profile IPOs in India since 2021 have destroyed investor wealth due to overvaluation, weak business models, and post-listing disinterest, turning ₹1 lakh investments into as little as ₹3,500.
What if your investment worth ₹100,000 made in a particular initial public offer (IPO) five years ago is now worth ₹50,000? Or worse, just ₹3,500?
This brutal, but real, crash is the story of some very popular IPOs in India since 2021.
According to analysts, overvaluation at listing, driven by pre-IPO hype, weak business models with unsustainable margins, unrealistic growth projections, regulatory shocks (Paytm, Star Health), and limited post-listing investor appetite were some of the common reasons that these IPOs failed to enthuse markets post listing.
Of the 280 IPOs that have debuted on Dalal Street since 2021, 15 are trading over 50 per cent below their issue price.
One in every four IPO issued since 2021 currently trades at over 10 per cent discount to its IPO issue price, data shows.
The top 6 IPOs that have turned out to be wealth destroyers for investors over the past five years include AGS Transact Technologies, Popular Vehicles & Services, One 97 Communications (Paytm), Fino Payments Bank, Star Health & Allied Insurance Company, and Dreamfolks Services.
On average, the overall/retail subscription in these IPOs stood at 11.8 times, and 9.4 times, respectively.
Of these, AGR Transact Technologies share price has crashed 97 per cent over its IPO price.
The ₹680 crore IPO of the integrated omni-channel payment solutions provider, which was subscribed 7.8 times, was brought at an issue price of ₹175. Today, the market price of the stock is barely ₹5.6 per share.
Similarly, Popular Vehicles and Services shares, whose ₹602 crore IPO was subscribed by 1.3 times, are down 55 per cent over their IPO price of ₹295 per share.
While their subscription levels ranged from 0.8x (Star Health) to 56.7x (DreamFolks), their share prices have tumbled between 51 per cent and 53.5 per cent over their issue prices.
Investor confidence
Sanat Mondal, head of private markets at Sanctum Wealth, explains that concerns over business model, unit economics, and inflated IPO valuation (38× FY21 P/E at the time of listing) led to the collapse of AGS Transact shares.
"Despite a footprint in payments infrastructure, weak digital transaction volumes, low-margin operations, and intensifying competition led to sustained erosion in investor confidence and financial performance," he explained.
Similarly, weak debut, tepid earnings momentum, and declining investor interest amid a mismatch between IPO hype and long-term fundamentals, hit Popular Vehicles shares, Mondal said.
The sector's saturation and lack of differentiated positioning also played a role in the post listing crash, he added.
While overvaluations, sustained losses, and regulatory headwinds pressured Paytm shares, a sharp 99 per cent profit drop in Q4FY25, persistently high claim ratios, and squeezed underwriting margins marred Star Health's post-IPO trajectory.
For DreamFolks, inconsistent earnings and a lack of clear profitability levers, combined with limited institutional support, eroded market enthusiasm, analysts pointed out.
"Investors need to be very cautious and selective while investing in an IPO. Instead of falling for the pre-IPO euphoria, market participants should focus on the quality of the management and earnings visibility," said Kranthi Bathini, equity strategist at WealthMills Securities.
The road ahead
Going ahead, analysts suggest investors re-evaluate the fundamentals of these companies on parameters such as profit visibility, earnings trajectory, growth metrics, and sectoral outlook.
"If the company shows consistent improvement and a viable path to profitability, it may be worth holding or even accumulating on dips. However, if the fundamentals remain weak or deteriorate further, consider exiting and reallocating your capital to better opportunities," said Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities.
Sheth added investors should avoid holding onto a losing stock simply because he/she bought it at a higher price.
In fact, investors could use unrealised losses, to offset capital gains, and reduce their tax liability.
That said, Indian primary markets could see IPOs worth $18 billion (₹1.54 trillion) in the second half of 2025, said a recent report by Jefferies Financial Group.
These include possible offers by ICICI Prudential Asset Management, Meesho Ltd., Groww Invest Tech, Lenskart Solutions and LG Electronics India.
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Feature Presentation: Rajesh Alva/Rediff
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