Urban Company, Lenskart, and Physicswallah: Why Have New-Age IPOs Struggled Post Listing?

In recent years, several new-age companies like Lenskart, PhysicsWallah, Pine Labs, Urban Company, and WeWork India have turned profitable just before launching their Initial Public Offerings (IPOs). While this initial profitability attracts investors, many of these companies struggle to sustain profits after entering the stock market. 

Profitability Before IPOs

Turning profitable before a public listing has become a common practice among start-ups. These companies often use accounting adjustments, one-time gains, and aggressive revenue recognition to present a stronger financial picture. This approach helps build confidence among investors, making it easier to sell shares during the IPO.

In the private phase, companies have more flexibility. They can delay certain costs, offer subsidies, or focus on rapid growth over consistent profits. This makes pre-IPO profits appear stronger than what the core business might sustain in the long term.

Challenges After Listing

Once listed, companies face a higher level of scrutiny from investors, regulators, and auditors. Public market investors expect predictable earnings and a clear path to profitability. Start-ups that previously prioritised growth over efficiency often need to cut back on subsidies, scale down expensive expansions, and address operational inefficiencies.

Additionally, compliance and governance costs increase significantly after listing. Investments in audit, legal, investor relations, and regulatory reporting eat into margins that were already thin. Every strategic decision, pricing adjustment, and business pivot comes under public observation, further pressuring profitability.

Sustainability of the Business Model

Many start-ups list before fully stabilising their business models or achieving sustainable unit economics. While the IPO narrative emphasises growth and market potential, the underlying costs and operational realities often limit revenue growth post listing. The result is a decline in profits, even if the pre-IPO numbers appeared strong.

Investors need to look beyond headline profits and examine whether the company’s core growth engine can sustain itself under public market pressures. Long-term profitability depends on operational stability, controlled costs, and a business model capable of generating consistent returns.

Read more: Kwality Wall’s India Makes Key Board Members Appointments Ahead of Its Demerger from HUL.

Conclusion

New-age IPOs frequently showcase profitability at the time of listing, but sustaining these profits is challenging. Operational realities, higher compliance costs, and the need for transparency reveal the true financial health of the company. For investors, understanding the long-term business model and the sustainability of profits is crucial before investing in such IPOs.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.