|
Two By Two Fri, 07 Nov 25 |
An abridged, narrative version of the latest episode of Two by Two, The Ken’s premium weekly business podcast. |
Good Morning [%first_name |Dear Reader%],
You are on a free plan. Your subscription has expired. Upgrade now to unlock premium newsletters, top feature stories, exclusive podcasts, and more.
India’s “wedding season” started this week. An estimated Rs 6,50,000 crore in spends across 46,000,000 weddings in the space of 45 days. Many of these will be the expensive, elaborate, and grand kind. The “Great Big Indian Wedding”.
But today’s newsletter and this week’s episode are about another set of expensive, elaborate, and grand events–the Great Big Indian IPOs. Just like with weddings, a lot rides on external appearances. What’s the valuation? How many times is it oversubscribed? Which big-name anchor investors are attending? And most importantly, what will be the listing day “pop”?
It’s a lavish party where pomp and sentiment are the main courses, and everyone wants a slice of the cake.
But as our latest episode explores, what happens after the confetti settles and the guests go home?
How many of these companies—and their investors—actually live “happily ever after”?
The conversation reveals a startling disconnect between the celebration of the IPO event and the sober reality of long-term performance. Anand Kalyanaraman, The Ken’s finance editor, analysed 332 companies that had done an IPO since 2021. He found a market where fundamentals are often sidelined for momentum, where even institutional players are caught in a web of conflicting incentives, and where the definition of a “good” investment has become dangerously blurred.
Is it still about value, or is it about playing a game where, as Praveen Gopal Krishnan (my co-host) puts it, it has become rational to be irrational?
This is the story of two markets—the wedding and the marriage. Here are some snippets from the conversation Praveen and I had with Anand and Seetharaman.
A floodgate opens
The modern IPO boom traces back to a fundamental shift in regulations that rewrote the playbook for who gets to go public. In 2021, the market regulator SEBI opened the floodgates, allowing loss-making companies to tap public markets. This, combined with a post-pandemic surge of capital, created the perfect storm. The bar for an IPO was lowered, transforming it from a “culmination of decades of hard work” into just another step in the funding journey.
Anand Kalyanaraman: “I think 2021 was a landmark year for IPOs in India. That’s when the market regulator, SEBI, eased the rules for IPOs. It allowed loss-making companies to IPO in India. And that opened the floodgates really… This was unheard of before. Until then companies had to be profitable.”
Rohin Dharmakumar: “The bar to do an IPO, which is essentially the supply side of IPOs, has been progressively dropping and you no longer need to be this really ambitious, well-run, consistently profitable company in order to do an IPO in India, right? Which means it’s no longer a culmination of decades of hard work and discipline.”
Seetharaman G: “Until three, four, maybe five years ago, it was seen as a culmination, big culmination… Now, that’s no longer the case.”
Anand Kalyanaraman: “Once the pandemic came in, there was this flood of money which came into the equity markets in India, both in the primary markets and in the secondary markets. A lot of it went to mutual funds. It was a golden era and the market has been rising since then, right? Almost.”
The sobering reality
Our central analogy frames the IPO as a wedding day, but the real story is the marriage that follows. Data since 2021 reveals a harsh reality: a significant number of newly public companies have failed to create value for their investors. Nearly half have delivered returns lower than a simple fixed deposit, proving that the initial hype of the “voting machine” often fails the long-term test of the “weighing machine”.
Rohin Dharmakumar: “Today’s episode of Two by Two is really about looking back at all those great Indian marriages in the context of stock markets, which is IPOs, and how many of them actually, if it’s the beginning of a new life, you’ll agree, it’s only apt to ask how many of them actually are living a happy life right now with their partners, which is really the investors.”
Anand Kalyanaraman: “I see that over one third of companies that IPOed since 2021 are in the red. They’ve lost money since then… Almost 50% of IPOs in India have earned less than what an investor could have got, had he actually put in his money in a safe FD with a bank. This is a key finding for me.”
Praveen Krishnan: “So I found the quote. It is by Benjamin Graham who says that in the short term, the market is a voting machine, but in the long run, it’s a weighing machine, which obviously means that in the short term, sentiments and everything else matters, but in the long run, the actual performance and the weight of it really starts to matter.”
Rohin Dharmakumar: “I just think in the long run, also, it’s a voting machine with SIR thrown in.”
An incestuous system
Who is driving this irrational market? The discussion peels back the layers to reveal a system where almost every player has an incentive to prioritise short-term gains and relationships over long-term fundamentals. From retail “flippers” to institutional funds playing a long game for future deals, the market often rewards participation over prudence. It creates a bizarre feedback loop where the most rational decision might be to join the irrational crowd.
Anand Kalyanaraman: “The IPO market… is a flippers market. A lot of people invest in IPOs to flip on listing day. There was this study which said that 50% of investors and IPOs sell on listing day. And they play for the listing gains.”
Seetharaman G: “There’s an IPO right now, and say the investment banks responsible for that IPO are also going to bring you Jio platforms. Okay? They’re also going to bring you NSE two years down the line, right? And you want to keep them warm. Right? If you turn them down now, it’s quite possible that they’re not going to come to you when those big IPOs come.”
Anand Kalyanaraman: “A lot many institutional investors also flip. They are playing the flipping game.”
Rohin Dharmakumar: “We started this conversation saying individual investors don’t look at anything, they just go by emotion. Now you’re ruling out institutional investors also. So then who exactly is playing this game and what exactly is going on?”
Praveen Krishnan: “Everyone in this market is irrational. Point two is that if you are a rational person and you see there are incentives that you get to be irrational, then by staying rational are you really rational? Won’t the more rational thing to do be to go crazy?”
Rohin Dharmakumar: “So you’re saying it’s rational to be irrational.”
Praveen Krishnan: “Exactly, that’s what we’ve come to, right?”
The contrarian playbook
In a market saturated with hype, how does a thoughtful investor find genuine value? The case of Ather vs. Ola provides a perfect example. While Ola garnered massive attention with its grand vision, Ather, the fundamentally stronger company, was overlooked. The discussion concludes that for those willing to look past the “wedding”, the path lies in returning to “old-school fundamentals” and having the discipline to wait for the irrationality to fade.
Seetharaman G: “Everyone knows Ather’s R&D is better, their scooters are better… Now you look at the stock. Now Ather is worth more than Ola. Ola has consistently lost market share… So the point is that the belief that public markets are inherently a better judge of a company, that doesn’t hold up with IPOs in my opinion anymore.”
Anand Kalyanaraman: “It is about fundamentals. Old school fundamentals. It is about valuation. Every contrarian investor we have spoken with and have interviewed at The Ken speaks of rational valuations as a foremost factor. That is important. It is about sustainability of the bottom line.”
Rohin Dharmakumar: “Why would you want it? There is nothing special about the share that you get at an IPO versus one that you get later in the secondary market. Therefore, the only reason can be that you’re hoping to profit from the IPO and the post IPO pop, right?”
Anand Kalyanaraman: “We also have MF houses that have a philosophy of not investing in IPOs… Parag Parikh Mutual Fund.
On another note, we’re excited to introduce the newest member of our team! Here’s Uddantika for you:
“Hi! I just wanted to say hello to our readers and listeners. My name is Uddantika Kashyap and I’m thrilled to be stepping into my new role as producer for First Principles and Two by Two at The Ken. I can’t wait to help bring the diverse conversations and viewpoints you hear here to life.
Two by Two is precisely the kind of show that leaves you wondering, long after the episode ends—and I’ll do my best to prolong that wonderment.”
You can listen to the entire episode here.
Regards,
Rohin Dharmakumar
Get a premium subscription to The Ken
Unrivaled analysis and powerful stories about businesses from award-winning journalists. Read by 5,00,000+ subscribers globally who want to be prepared for what comes next.
Trusted by 5,00,000+ executives & leaders from the world's most successful organisations & students at top post-graduate campuses
|
|
|
|
Rohin is Co-founder and CEO at The Ken.
He hosts The Ken's leadership podcast, First Principles, and is the lead writer of the Sunday newsletter on mental models, careers and personal growth, also called First Principles. He is the co-host of the Two by Two and Zero Shot podcasts. He is also a columnist for The Ken's AI series, Zero Shot.
Rohin holds an MBA from the Indian Institute of Management, Calcutta and an engineering degree in Computer Sciences from the R.V.C.E., Bangalore.
|
|
Share this edition
You can use the easy share buttons below
|
|
|
|
|
© 2025 The Ken
Do you know anyone else who would like to read this newsletter?
Share this edition with them.