Lenskart, Groww IPO: India's tech start-ups fire up public markets amid valuation concerns

India's public markets are experiencing a robust surge in start-up IPOs, exemplified by recent listings like Lenskart and Groww, which saw strong demand despite valuation concerns. This trend signals a maturing ecosystem, enabling early investors to exit, and is fueled by increased market participation and better regulation. While the 43 IPOs this year highlight significant activity, concerns persist regarding high valuations for new public investors, even as the market increasingly favors companies demonstrating profitability, strong fundamentals, and good governance, leading to a decline in start-up shutdowns. However, private equity and venture capital funding for new companies remains below peak levels, indicating a more discerning investment environment focused on quality.

Analysis

India's public markets are experiencing a significant surge in start-up IPOs, with 43 listings this year, a five-fold increase since 2020. Recent debuts like Lenskart's $821 million offering and Groww's 17x oversubscription highlight robust investor demand, driven by improved regulation and broader participation from retail investors, mutual funds, and insurers. This activity signals a maturing ecosystem, providing crucial exit opportunities for early-stage venture capitalists and angel investors who previously faced liquidity challenges.

Despite strong demand, the market exhibits caution regarding "structurally high" valuations, particularly for new public investors who may face limited profit potential post-listing. However, there's a discernible shift towards companies demonstrating profitability, strong fundamentals, and good governance, as noted by Accel and Tracxn. This focus on sustainability is reflected in an 81% decline in start-up shutdowns in 2025 compared to 2024, indicating a transition from rapid growth to strategic sustainability.

While public markets are active, private equity and venture capital funding for new companies remains subdued, reaching $9.8 billion in 2025, significantly below the $40 billion peak in 2021. This divergence suggests a more discerning private investment environment, prioritizing quality and disciplined capital deployment over sheer deal volume. The abolition of the angel tax is expected to further bolster investor confidence, though the cyclical nature of capital markets makes future momentum uncertain.

Key Decisions for Investors

• Investors should conduct thorough due diligence on new Indian start-up IPOs, focusing on company fundamentals, profitability, and governance rather than solely on initial demand or high growth narratives.
• Given acknowledged "structurally high" valuations, assess entry points carefully and consider the long-term profit potential for public market investors versus the significant returns already realized by early-stage investors.
• Observe private funding trends as the decline suggests a more selective environment, which could indicate a higher quality bar for future public listings but also potential headwinds for early-stage companies not yet demonstrating sustainability.