Indian IPO Valuations: Paying More For Less

A new 10-year analysis by venture capital firm Blume shows an interesting trend in India’s IPO market — companies are getting smaller, but their valuations are getting larger.

Since 2019, the median revenue of companies listing on Indian exchanges has declined by approximately 30%. Over 60% of companies are now going public with revenue below ₹1,000 crore ($118 million). Yet their valuation multiples have been heading in the opposite direction.

The median market cap/EBITDA multiple has expanded from 17.5x at listing in 2019 to 24.5x in the financial year ending March. The peak came in 2021, when multiples hit 32.8x during the post-pandemic IPO boom.

Some sectors have been particular beneficiaries of this multiple expansion. IT and financial services companies saw some of the highest valuation premiums, despite financial services showing the lowest revenue generation per rupee of private capital raised pre-IPO.

This expanding gap between fundamental metrics and market pricing raises questions about whether Indian markets are experiencing a structural re-rating, or if current multiples represent a deviation that will eventually mean-revert.

Follow India Dispatch on WhatsApp Channel.