New-age listing-day gains fade fast; IT deals up for renewal

India's new-age IPOs have experienced a decline in listing-day gains, which do not reliably predict long-term success. An ET analysis of 27 venture capital- and private equity-backed companies listed since 2024 reveals that investors quickly revise their initial assessments as execution, competition, and cash burn take precedence over scarcity-driven demand.

Out of 17 stocks that opened above their issue prices, seven have since traded below their IPO prices, demonstrating how swiftly early gains can disappear. Four of these discount openers have recovered above their IPO prices, while three others opened at flat prices. Companies like Unicommerce, MobiKwik, FirstCry, Shadowfax, Amagi, and BlueStone have all seen their strong debuts underwhelm, while Lenskart has reversed a weak opening.

Investors should look beyond the initial auction and focus on quarterly disclosures that scrutinize revenue quality, margins, cash generation, competitive intensity, and management's ability to deliver on guidance. This insight is particularly relevant for the upcoming IT deal renewal cycle, where about $13 billion worth of IT contracts are expected to be renewed by December 2026, mirroring the same period in 2025.

Despite rising order volumes, AI-led deflation and vendor consolidation are keeping overall values flat. While large deals typically exceed $100 million and mega deals surpass $500 million, Wipro's seven-year engagement with ICICI Bank, valued at $300 million, and TCS's expanded contract with GE Healthcare at $350 million showcase the scale of these transactions.

Experts caution that while the order book remains healthy, the conversion of these deals into AI apps and services remains uncertain, as clients weigh productivity improvements against implementation costs. Lenskart, for example, achieved steady growth in Q1 revenue and profit, buoyed by higher volumes, premium products, and international expansion.

CEO Peyush Bansal attributes this success to operating leverage and growing premiumization, as well as increased domestic manufacturing. However, currency fluctuations have posed a challenge, as Lenskart's cost base is heavily influenced by its Chinese supply chain. Despite these hurdles, Lenskart's product margins remain resilient, absorbing the currency impact through structural offsets like expansion of in-house production.