A recent report by Client Associates has shed light on the performance of Indian startup IPOs, revealing that only 36% of new-age tech IPOs have delivered long-term alpha to investors between 2020 and 2025.
This analysis, titled 'The New-Age IPO Performance Analysis,' examined 25 tech IPOs launched during this period, highlighting a significant gap between hype and actual returns for many investors.
Understanding the Performance Gap in Indian Startup IPOs
While pre-IPO investments showed promising returns averaging 43%, investors entering at the IPO stage or post-IPO faced much lower profitability, with returns dropping to 36% and 32% respectively.
The report cautions against the dangers of hype-driven investments, urging investors to focus on business fundamentals rather than market excitement.
Historical Context: The Rise of Indian Startup IPOs
Over the past decade, India has emerged as a global leader in startup ecosystems, with a surge in IPOs particularly in the tech sector since 2020, driven by digital transformation and investor interest.
However, the post-2022 market slowdown revealed vulnerabilities, as many startups struggled with profitability and governance issues, impacting long-term investor confidence.
Impact on Investors and the Startup Ecosystem
The underwhelming long-term returns have raised concerns among retail investors, who often bear the brunt of post-IPO underperformance in retail-driven listings.
For the broader startup ecosystem, this trend could dampen enthusiasm for future IPOs, potentially affecting venture capital funding and startup valuations in India.
Looking Ahead: Challenges and Opportunities
Looking to the future, experts suggest that startups need to prioritize profitability, governance, and scalability to rebuild investor trust and ensure sustainable growth post-IPO.
Policy reforms and increased scrutiny of IPO processes could also play a critical role in protecting investors and fostering a healthier market environment.
As India continues to lead global IPO listings—raising $4.3 billion in Q3 2024 alone—the focus must shift to quality over quantity to avoid repeating past mistakes.
Ultimately, while the Indian startup story remains one of immense potential, the Client Associates report serves as a critical reminder that not all that glitters in the IPO market is gold.
Andrew Lee
