“By shamelessly merchandising birdless bushes, promoters have in recent years moved billions of dollars from the pockets of the public to their own purses...” Warren Buffett wrote those lines in his annual letter to Berkshire Hathaway shareholders amid the 2001 dot-com saga.

He could almost have been describing a large part of India’s IPO market over the last five calendar years (2021-2026) when price-to-earnings multiples above 100x became common, reflecting an insatiable appetite for new issues, with share sellers laughing all their way to the bank.

In theory, capitalism is presented as a system in which public markets help growing businesses raise fresh capital, expand and create wealth that is shared between founders and new investors. In practice, a surprising number of Indian IPOs have resembled something far less noble. They became a sophisticated wealth-transfer mechanism in which retail investors, armed with ₹15,000 applications and dreams of multi-baggers in the long run, handed over hard cash so that promoters, private equity funds and early backers could walk away with real money, leaving investors holding shares that have since sunk in the market downturn.

Costly wave

The biggest clue lies in the structure of these issues itself. Over the last five years, India saw around 300 IPOs that had an Offer-for-Sale (OFS) component. Tellingly, 68 of these were fully OFS issues. This means not a single rupee of the ₹1.76 lakh crore raised went into expanding capacities, funding growth, reducing debt or building a business. The only cold objective was monetisation.

Today, the numbers are not flattering. These 68 fully OFS IPOs debuted with a combined market capitalisation of about ₹16.88 lakh crore on listing day (closing). By April 2, that figure had fallen to roughly ₹15.93 lakh crore, a destruction of around ₹95,000 crore of wealth. Here, one should not just look at the number, but also the time value of money since many years have passed for some of these IPOs and also the opportunity cost had they invested it elsewhere including a simple bank FD.

On average, each such company has seen about ₹1,400 crore wiped out from its listing-day value. More importantly, over 61 per cent, or 42 of the 68, are now trading below their listing-day market capitalisation. The listing-day pop, the euphoric anchor-book headlines and the breathless television countdowns proved to be short-lived excitement rather than enduring value.

This is perhaps the clearest evidence that many of these issues were sold at rich valuations. The average P/E of these 68 companies was 57x even though Nifty50 in the last 5 years has traded in the 20-30x band. In IPO of firms such as Vedant Fashions, C.E. Info Systems, and Campus Activewear, valuations exceeded 100x PE — meaning investors paid over ₹100 for every ₹1 of profit.

Wipeout

Among the more striking cases is AGS Transact Technologies where the current market capitalisation is lower than the funds raised by selling shareholders through OFS! The ongoing market correction has begun to expose such IPO excesses. Expensive stories are being repriced. Businesses with weak fundamentals and no real runway are falling hardest.

Yet, this is not a case for avoiding IPOs with 100 per cent OFS altogether. OFS issues including by Mankind Pharma, Anand Rathi Wealth, ICICI Prudential AMC and KFin Technologies are examples of strong businesses that listed at reasonable valuations.

Selling shares via the OFS route at expensive valuations, by itself, is not a crime. Promoters and financial investors have every right to sell. But investors should ask a simple question: If the promoters, private equity funds and early backers are all choosing this moment to cash out, why should the public be rushing to buy in?

There are lessons in all of this. Investment bankers did what they are paid to do — maximise price and their fees. As Buffett said in the 2001 letter, fee-hungry investment bankers acted as eager postmen for such deals. Promoters and financial backers did what they are supposed to do — sell when valuations are generous. The only group that forgot to do its job was the investor.

Published on April 4, 2026