Ajay Srivastava Slams Blind IPO Frenzy: Warns Investors Against ‘Nutcase Valuations’

Lenskart Ltd.'s initial public offering raised questions around the high valuation of IPOs. Ajay Srivastava, Managing Director of Dimensions Corporate Finance Services, has issued a sharp critique of this rising trend of sky-high valuations.

Srivastava questioned the rationale behind investing public money in companies that, despite their growth narratives, show no clear path to profitability.

“The question is if you pay these nutcase valuations, when do you make the return?” Srivastava asked, pointing out that even fundamentally strong companies can become poor investments when valuations are irrational.

He noted that while the market often gets carried away by hype, reality eventually catches up.

“There are enough examples of nutcase valuations — even good companies with bad valuations. You name one that makes sense economically in terms of profitability and market share in the near horizon,” he told NDTV Profit, adding that only a few exceptional cases truly justify their price tags.

Srivastava was particularly critical of consumer-facing startups that continue to operate on heavy losses while demanding lofty valuations. “By and large, paying this kind of money for a consumer-driven, cash-loss-led model doesn’t make sense. We’re not even paying these valuations for AI-driven majors in the US that are growing 30–50% with billion-dollar investments,” he remarked.

Without naming names, Srivastava pointed to past IPOs that had promised aggressive growth but delivered sustained losses. “Look at what happened to Paytm. It had a massive IPO, and where is it today? Just because people are subscribing doesn’t make the valuation rational,” he said.

He also criticised mutual funds for investing public money into such companies without sufficient scrutiny.

According to him, retail investors end up taking “project risk” — backing untested business models without understanding the underlying uncertainty.

Srivastava also raised serious concerns about corporate governance standards in some of the companies preparing to list.

He argued that investors should stay away from promoters and boards that engage in financial engineering. “There are over 3,000 listed companies in India with good pedigree. Why chase sharks who are playing with your money?” he asked.

Despite his criticism, Srivastava acknowledged that the new-age sector holds potential. “Yes, there is a future for these companies. But the question remains — if you pay these nutcase valuations, when do you make the return?” he concluded.