In a significant development for India’s startup ecosystem, more than 36 tech startups, collectively valued at $100 billion, are gearing up for public listings by 2027. This surge, as projected by The Rainmaker Group, signals a revival of stock sales in India following a period of market slowdown.
The expected IPO lineup includes prominent names such as Flipkart, PhonePe, and Oyo Hotels. These companies plan to tap into India's capital markets, which ranked as the world’s second-largest for share sales last year. However, recent months have seen a dip in IPO activity, making the upcoming wave of listings crucial for the market’s recovery.
The Rainmaker Group’s analysis indicates that the current batch of startups preparing for IPOs is in a significantly stronger financial position than those that went public in 2021 and 2022.
“The financial health of the startups due to list in the next two years is materially better than the companies that listed previously,” said Kashyap Chanchani, managing partner at Rainmaker.
Chanchani emphasized that two-thirds of these firms are already profitable and have improved transparency, making them more appealing to investors. This marks a stark contrast to previous IPOs, where several high-profile startups suffered post-listing crashes.
For instance, Paytm’s share price has plummeted by 63% since its IPO, while beauty retailer Nykaa has declined by 4%. Investors are now placing greater emphasis on profitability and corporate governance, rather than just aggressive expansion.
Despite the optimistic outlook for startup IPOs, India’s stock market has seen a decline in activity in early 2024. The number of share sales dropped by 34% in Q1 2024, and total IPO, block sale, and share placement proceeds fell to $7.1 billion—a significant drop from previous quarters. This slowdown has placed India behind Hong Kong and Japan in IPO volumes for the first time in years.
Still, investment bankers remain optimistic, anticipating a resurgence in the coming months.
“Several major deals are expected to hit the market soon,” said Chanchani.
Among the major IPOs expected soon are:
LG Electronics India – Potentially raising up to $1.7 billion.
Ather Energy Pvt. – An electric scooter maker, aiming for $400 million in funding.
Flipkart and PhonePe – Two of India’s biggest digital businesses, gearing up for blockbuster listings.
A wave of IPOs would provide much-needed exit opportunities for major investors, including SoftBank Group Corp. and Prosus NV. SoftBank’s Vision Fund holds significant stakes in Oyo, Lenskart, and CARS24, while Prosus is a key investor in Meesho and Urban Company.
“Firms like SoftBank and Prosus have a dozen companies or so where they are sitting on massive gains, and several of these firms have begun seeking the public markets route,” said Chanchani.
However, he cautioned that IPOs must be priced carefully, as retail investors have grown wary of inflated valuations. Many newly listed stocks have suffered post-listing due to poor pricing strategies and high initial valuations.
Despite the promising outlook, startups looking to go public will have to navigate a challenging market environment. Some of the key concerns include:
Economic Slowdown: India’s GDP growth has slowed, impacting investor sentiment.
Stock Market Volatility: The NSE Nifty 50 Index, which had seen nine consecutive years of growth, started declining in late 2023.
Post-IPO Performance Worries: Several startups have struggled after their initial listing due to overvaluation and market corrections.
Corporate Governance Issues: High-profile governance failures have raised concerns among institutional investors.
A prime example of corporate mismanagement is Byju’s, once valued at over $22 billion. The edtech giant, founded by Byju Raveendran, has faced mounting investor skepticism due to financial irregularities and operational missteps.
“One of the key questions that investors ask us often is—can we trust the founders?” Chanchani remarked.
India’s startup ecosystem remains one of the largest in the world, trailing only the US and China. However, the coming years will be a litmus test for how well Indian startups can transition from high-growth private enterprises to sustainable, publicly traded companies.
With $100 billion worth of IPOs in the pipeline, the next three years will shape India’s tech and investment landscape. If these companies can deliver strong financials and transparency, India could emerge as a global leader in tech listings, attracting both domestic and international investors.