India’s IPO frenzy: Are startups being built just to exit? Expert asks tough questions

India’s IPO landscape is gradually gaining momentum after a subdued two-year period, but experts caution that a selective and cautious approach remains crucial. A wave of flashy IPOs has swept through India’s startup ecosystem in recent years. But as stock prices stumble and retail investors count losses, a deeper concern is emerging — are some of these companies being built not to last, but just to list?

Take Nykaa, the much-hyped beauty and fashion retailer. If you had invested Rs 400 in its shares four years ago, your holding would be worth just Rs 200 today. What’s worse, there was barely any opportunity in that time frame to exit at a profit. The stock never returned to its lofty listing-day valuations.

“This isn’t just about market cycles. You were structurally locked out of profit,” says Akshat Shrivastava, a popular investor and financial educator. “Nykaa’s stock performance reveals something more systemic: a company built for IPO hype, not long-term investor value.”

So, who was buying at these inflated levels? While exact data is elusive, a substantial portion was purchased by Domestic Institutional Investors (DIIs), especially Indian mutual funds. As of now, DIIs hold nearly 25% of Nykaa’s equity.

“The broader playbook is becoming clear,” Shrivastava explained. “You build a company, inflate the valuation through venture rounds, then sell it to Indian retail investors — mostly via mutual funds funded by SIPs.”

Nykaa isn’t alone. Similar stories are playing out with firms like Ola Electric, PayTM, Delhivery, PB FinTech, and CarTrade. Despite weak profitability and inconsistent execution, many of these companies were rushed to public markets at eye-watering valuations.

“Retail investors think their SIPs are going into blue-chip, well-researched companies,” Akshat adds. “But a chunk of that money is quietly getting funneled into risky, unproven startups through IPO allocations.”

He also points out a glaring double standard in how investments are labeled: “Bitcoin is branded speculative — yet it’s delivered over 78% returns in the last year and more than 900% in five years. Meanwhile, we call these tech IPOs ‘sound investments’ and pour public money into them.”

The concern is clear: India's capital markets are increasingly being used as exit platforms for early investors, rather than avenues to support long-term business growth. Retail investors — often the last to enter — are left holding the bag.

As more IPOs line up in the coming quarters, Shrivastava urges caution: “Ask yourself — is this a business you’d want to own for ten years, or is someone else looking to exit at your cost?”

IPO frenzy

This is a busy week, with 14 IPOs—eight mainboard and several SME issues—set to open for subscription. Notable names include NSDL (Rs 760–Rs 800), Aditya Infotech (Rs 640–Rs 675), M&B Engineering (Rs 366–Rs 385), and Sri Lotus Developers (Rs 140–Rs 150). SMEs like Repono (Rs 91–Rs 96), Kaytex Fabrics (Rs 171–Rs 180), and Umiya Mobile (Rs 66) are also hitting the market. According to EY’s Global IPO report for H1 2025, India saw a 30% year-on-year dip in IPO volume, though proceeds remained steady. With eleven listings also lined up, supported by retail investor interest and favorable market conditions, next week could be pivotal for IPO activity.