Tech IPO Boom or Retail Investor Doom? Inside India’s Overvalued Listings

According to the research team of ClipsTrust, recent tech IPOs in India such as Lenskart, Paytm, Ola Electric, and Boat are raising serious concerns about the impact on retail investors, highlighting a pattern where overvaluation, hype, and structural flaws in the IPO ecosystem are causing financial losses for many retail participants. Despite the substantial enthusiasm from retail investors, led by the strong personal branding of company founders and extensive influencer marketing, these IPOs have often resulted in disappointing returns due to inflated valuations, questionable profitability, and founders and venture capitalists exiting with large profits at the expense of retail investors.

Overview of the Tech IPO Landscape in India

India's IPO market saw a surge in tech and consumer-focused IPOs in 2025, with major companies like Lenskart raising over ₹7,000 crore and attracting bids exceeding ₹1 lakh crore, being oversubscribed 28 times. Investors were drawn by the promise of high growth in emerging sectors like eyewear, fintech, electric vehicles, and lifestyle electronics. Despite strong subscription numbers and market anticipation, several companies debuting on stock exchanges have experienced share price declines post-listing, often opening at discounts compared to their IPO prices, indicating investor caution and valuation concerns.

Valuation multiples of such tech IPOs have been significantly higher than industry norms. For example, Lenskart was valued at over 230 times its expected earnings, far exceeding average peer ratios, causing skepticism among analysts. Similar trends were observed in Paytm and Ola Electric, where IPOs were launched amid considerable hype but failed to provide sustainable gains to retail investors due to business challenges and ongoing losses.​

Problems with Recent Tech IPOs

1. Overvaluation and Unclear Profitability

• Many companies came to market with sky-high price-to-earnings (PE) ratios, some exceeding 200, with little clear path to profitability.

• Sudden "path to profitability" announcements shortly before IPOs raised red flags and suggested artificial profit boosting, e.g., one-time settlements in Lenskart's case.

• Investors often overlooked fundamental financial performance in the face of aggressive marketing and founder branding.

2. Founders Exiting and Profit Taking

• Founders and early investors cashed out large sums during IPOs, often leaving retail investors holding overvalued stocks.

• Lenskart’s founder reportedly earned over ₹800 crore from the IPO, with retail investors seeing minimal returns on listing day.

• IPOs became more about providing exits for early investors than long-term business growth.

3. Hype-driven Investment and Branding Influence

• Extensive use of social media, influencer marketing, and founder persona-building induced emotional investing.

• Examples include Ola’s "Make in India EV revolution" narrative and Mamaearth’s personal Instagram branding of the co-founder.

• Such tactics distracted retail investors from scrutinizing the actual underlying business fundamentals.

4. Regulatory and Market Ecosystem Gaps

• Structural flaws in India’s IPO ecosystem allow companies to self-classify as "tech" firms to justify inflated valuations.

• Lack of adequate investor education and prevalence of hype in media coverage further exposed retail investors to risks.

• Mutual funds and institutional investors sometimes participated without thorough due diligence, exacerbating issues.

Case Studies

Case Study 1: Paytm IPO

• Problem: Valuation was priced at 47 times sales with no clear revenue model; faced declining revenue per user and shrinking market share.

• Solution: Post-IPO, Paytm attempted business focus shifts but the stock price fell 70% from the listing price, wiping out significant shareholder value.

• Lesson: High valuations without clear earnings trajectory can be catastrophic for retail investors.​

Case Study 2: Lenskart IPO

• Problem: Loss-making company suddenly declared profitability due to a one-time settlement just before IPO; high PE ratio of 230; founder cashed out heavily.

• Solution: Strong omnichannel strategy and market leadership provide long-term growth potential; however, initial market reaction saw stock price drop on listing.

• Lesson: Market leadership alone can't justify excessive valuations; earnings quality needs scrutiny.​

Case Study 3: Ola Electric IPO

• Problem: Significant cash burn with unresolved product quality issues, frequent battery failures, and recalls; valuation inflated on patriotic tech narrative.

• Solution: Early listing raised capital but stock price dropped quickly post-listing due to operational challenges.

• Lesson: Product readiness and financial health are crucial despite hype-driven narratives.​

Market Research Surveys & Reviews

• General Public Opinion: Investors feel misled by heavy marketing and founder branding. Many experienced losses despite initial enthusiasm.

• ClipsTrust Review: Highlights the need for investors to analyze financial fundamentals over hype and to avoid being swayed by influencer marketing or over-the-top valuation claims.

• Expert Opinions: Financial analysts caution on the sustainability of valuations and urge better investor awareness and regulatory scrutiny.

Pros and Cons of Investing in Tech IPOs

Pricing and Plans

Investors typically can participate in IPOs by subscribing through brokerages with minimum lot sizes. The prices are set in a price band (e.g., Lenskart IPO was ₹382–₹402 per share). Pricing plans depend on investor class: retail, institutional, or non-institutional.

ClipsTrust Tips and Notes for Retail Investors

• Always read the Draft Red Herring Prospectus (DRHP) carefully for company financials and risk factors.

• Avoid investing based solely on founder or influencer popularity.

• Look for sustainable profit models and reasonable valuation metrics (PE ratios preferably below 30).

• Be cautious of sudden profitability claims just before IPOs.

• Diversify investments to mitigate risks associated with any single IPO.

• Understand your risk tolerance and invest only what you can afford to lose.

Expert Tips for Smart IPO Investing

• Conduct peer comparison of financial ratios before subscribing.

• Monitor grey market premiums as a sentiment indicator but do not rely solely on them.

• Research the promoter's shareholding pattern and any major share sell-offs.

• Follow long-term business prospects rather than short-term listing gains.

• Consult financial advisors or reliable market institutes for guidance.

Common Issues and How to Fix Them

Why This Blog is Beneficial for Users

This comprehensive analysis helps retail investors understand the risks and realities behind popular tech IPOs, enabling informed decision-making. It sheds light on systemic issues, promotes financial literacy, and encourages skepticism of hype-driven investing for wealth protection.

Frequently Asked Questions (FAQs)

Q1: Are all tech IPOs bad investments?
No. Some tech IPOs like Zomato have delivered good returns, but caution and research are essential.

Q2: How can retail investors avoid losses from such IPOs?
By assessing business fundamentals, avoiding overhyped companies, reading official filings, and not following influencer hype blindly.

Q3: What does a high PE ratio indicate?
It suggests high price relative to earnings; very high PE ratios imply risk of overvaluation.

Q4: Should I invest in IPOs with strong founder branding?
Founder branding alone is not a reliable investment criterion. Financial health matters most.

Q5: How often do founders sell shares during IPOs?
Often, founders use IPOs as exit opportunities; investors should check shareholding patterns before investing.