India Is The 'Dumbest IPO Market', Says Shankar Sharma Amid Lenskart Valuation Debate
Speaking to NDTV Profit, veteran investor Shankar Sharma argued that a "beautiful little game" is being played on small investors using psychological tactics like "anchoring bias."
Veteran investor Shankar Sharma, Founder of GQuant Investech, minced no words while talking about the Initial Public Offering (IPO) market, labelling India's IPO market as the "dumbest in the history of IPO markets", driven by "dumb money" from retail investors.
His comments came as eyewear retailer Lenskart Solutions garnered a blockbuster response for its upcoming IPO, receiving bids of around Rs 68,000 crore from its anchor investors on Thursday. The anchor book saw participation from around 70 marquee investors.
Speaking to NDTV Profit, Sharma argued that a "beautiful little game" is being played on small investors using psychological tactics like "anchoring bias." He dismissed the presence of noted anchor investors and pre-IPO marquee names as a strategy to build hype and justify valuations that "cannot be justified at any metric."
"This is all a nice little game of anchoring bias", Sharma said, "If you look at it rationally, the whole point is using anchor books, or using marquee investors pre IPOs, using big names as we have seen in the past, you can get so much in India because there is so much dumb money," he added.
Calling the IPO as "dumb" Sharma launched a scathing attack saying, "India is the dumbest IPO market that has existed in the history of IPO markets. There are so many billions of money flowing in from retail investors. You have to be out there as a merchant banker exploiting that."
Sharma described a two-part process that he claims defines the market. First, an IPO is completed at an unjustifiably high valuation. Second, the stock inevitably collapses post-listing.
"The stock will fall... 50%, 60%, 80% as we have seen," Sharma said, citing the performance of new-age tech companies like CarTrade, Nykaa, Zomato, and Paytm as prime examples.
According to Sharma, the "nub of the problem" lies in the flawed analysis that follows the crash. He argued that investors, anchored to the initial high IPO price, view the 80% drop as a bargain rather than assessing the company's fundamental worth at its new, lower valuation.
"Nobody asks if at 25 thousand crore, it is still worth it. Everything gets anchored at the IPO price," he explained.
Sharma concluded with a cynical view of the market mechanism, calling it "the way capitalism works.'
"It's a beautiful little game. I love it. That's the way capitalism works. The millions and billions of small investors coming in. Someone has to extract money from them, so these IPOs come and take money from you," he concluded.
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Watch the full interview of Shankar Sharma:
Contrarian View
In an open letter, business analyst Jayant Mundhra criticised Lenskart’s $7 billion IPO, accusing Bansal of dodging valuation questions, inflating overseas assets and ignoring franchisee lawsuits.
He has also branded the IPO a 'mockery' of public trust. Mundhra alleged that Lenskart's management has deflected by emphasising "creating value for customers" over discussing the IPO price, a stance he characterises as dismissive of public market scrutiny.
Vishnu Agarwal, founder of Stock Knocks, said, "That warning, about pricing an IPO fairly, is the ghost haunting the Lenskart IPO. On one side, a 'Shark Tank' promoter known for grilling founders on valuation. On the other hand, an IPO priced at an eye-watering 236x P/E, where the promoter himself bought a stake at an 8x lower valuation just two months ago."
