India Is in an IPO Frenzy Again. Wait Until It Cools.

India’s online brokerage Groww application on a smartphone

Forget Nvidia or Alibaba Group Holding, for a moment. What about education tech pioneer PhysicsWallah, whose shares jumped by a third after an initial public offering this week; Billionbrains Garage Ventures, parent of online brokerage Groww, up by half since coming to market Nov. 12; or services marketplace Urban Company, which has gained 40% from a mid-September debut?

If you don’t know those names, you are probably not among the Indian retail investors pouring $3 billion a month into their Systematic Investment Plans, and hunting for big kills with flashy new-economy profiles. “With 80% of retail money going into small and mid-cap mutual funds, every investment banker with a pulse is IPOing,” says Saurabh Mukherjea, chief investment officer at Marcellus Investment Managers in Mumbai.

That doesn’t mean a South Asian reprise of failures like Pets.com and Global Crossing is under way. While the global start-ups of yesteryear spend zillions chasing artificial intelligence supremacy, India still has valuable niches to fill in first-generation e-commerce, and a government that has laid the groundwork with spanking new national payments and identification systems.

“I’ve never seen anything as compelling as the Indian internet for companies to buy and hold,” says Kevin Carter, founder of EMQQ Global, which operates the India Internet exchange-traded fund. “Almost every part of the economy is ripe for consolidation.”

Bigger transactions are likely in the pipeline. Carter expects Flipkart, India’s answer to Amazon.com (though it is actually controlled by Walmart) and payments power PhonePe to IPO early-ish next year. Reliance Industries oligarch Mukesh Ambani has hinted that its giant internet subsidiary, Jio Platforms, might join the party.

Non-Indian investors are still waiting for some smoke to clear. “A company like Urban is a fascinating business that doesn’t make any money yet,” says Rob Brewis, head of emerging markets at Aubrey Capital Management. “We’ll take another look when we are pretty sure we can measure profitability.”

The Indian internet movie ran once before, and the second act was ugly. Two dozen start-ups came to market in 2020-21, then cratered by three-quarters to troughs in 2023-24, Carter says. Some survivors among these “fallen angels” have bounced by multiples since then, earning tidy profits for more patient investors.

Aubrey owns Eternal, parent company of food delivery dynamo Zomato, and FSN E-Commerce Ventures, parent of beauty products site Nykaa. Bargain bin pickups for Venkat Pasupuleti, portfolio co-manager for India at Dalton Investments, include One97 Communications, the holding for Paytm, and CarTrade Tech.

Valuations look more sober in 2025, Pasupuleti says, as asset managers on the receiving end of the SIPs are guiding the market rather than individuals buying directly. “The top four mutual funds control 80% of the flows,” he notes. “They are the price setters now.”

Some new issuers are taking less from public markets than they were supposed to be worth privately. Payments manager Pine Labs lately came to market at a $3 billion valuation, a 40% cut from its last private round. That hasn’t dimmed the ardor of rich Indian families for pre-IPO investment yet, Pasupuleti says. “Everybody is throwing names around: I have this company, I have that company,” he recounts. “The pipeline is crazy.”

For Mukherjea, the lesson is to buy blue chip Indian names that domestic newbies find boring and global investors have sidelined to chase AI stocks elsewhere. “Very few people are interested in buying large-cap quality now,” he says. “You’re seeing the cheapest valuations in a decade.”