ESDS Software shares fell 5% to hit the lower circuit of Rs 1,360 on Monday, marking a 30% drop over six sessions. This selloff followed the expiry of a one-month shareholder lock-in period. Expert Santosh Meena said, “Fresh investors should avoid chasing at current levels and wait for a meaningful correction.”
Shares of ESDS Software Solutions, one of the best-performing IPOs in India in 2026, fell as much as 5% to hit the lower circuit of Rs 1,360 on Monday, extending losses for a sixth straight session. The stock has declined nearly 30% over the past six sessions.
The decline comes as the one-month shareholder lock-in period expired today. According to Nuvama Alternative & Quantitative Research, around 2.5 million ESDS Software shares, equivalent to 2.5% of the company's outstanding equity, became eligible for trading following the expiry.
However, the expiry of the shareholder lock-in does not mean that all these shares will be sold in the open market. It only makes the shares eligible to be traded.
ESDS Software shares made their stock market debut on September 4 at a 76% premium to the issue price of Rs 429 per share. The stock immediately doubled from its issue price. The shares then climbed to a post-listing high of Rs 1,859.2 within a few days, delivering a return of more than 4x from the issue price. The stock, however, entered a correction phase after the company reported its first-quarter results last week, its first results since listing.
The company reported a 7.3% year-on-year increase in operating revenue to Rs 133.7 crore in Q1 FY27. However, revenue fell 20.2% sequentially from Rs 167.5 crore in the previous quarter. Profit after tax rose 14% year-on-year to Rs 29.3 crore, but declined around 57% sequentially from Rs 67.7 crore.
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The Q1 revenue growth also marks a sharp moderation from the company’s roughly 28.4% revenue CAGR between FY24 and FY26, pointing to a significant slowdown in the pace of growth.
What should investors do?
“Fresh investors should avoid chasing at current levels and wait for a meaningful correction, as valuations have become stretched (from a reasonable ~42x FY26 earnings at IPO to 140–170x now).” Santosh Meena, Head of Research at Swastika Investmart, told ETMarkets. Allotted investors, sitting on life-changing gains in days, should aggressively book partial profits (40–60% or more) to lock in returns while retaining a core holding for the longer-term story, given the high risk of sharp reversals once momentum fades.
The rally mixes genuine thematic excitement with FOMO and scarcity premium; upside remains possible if AI capacity ramps smoothly and India’s cloud/GPU markets deliver the projected 20–50% CAGRs, but much of the multi-year optimism is already priced in, leaving limited margin of safety and elevated execution risk.
Fundamentally the industry looks robust: India’s data-centre capacity is set to expand several-fold by 2030 on the back of cloud adoption, data localisation, digitalisation and AI workloads, with significant capital commitments from hyperscalers and domestic players. ESDS is well-positioned as a full-stack sovereign-cloud and AI-infra provider with improving margins, sticky customers and expansion plans funded by the IPO, but near-term success hinges on timely capacity addition and contract delivery. Overall, treat it as a high-beta thematic bet—rewarding for early allottees who de-risk, risky for late entrants at peak valuations.
Even as India continues to lag markets such as South Korea and Taiwan in direct exposure to the AI and semiconductor cycle, a different AI-linked investment theme is gathering momentum at home.
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(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
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