India is set to witness a revival in stock market debuts as more than three dozen tech startups, collectively valued at $100 billion, prepare to go public by 2027. This wave of initial public offerings (IPOs) marks a strong comeback for share sales in the country, according to one of India’s leading deal advisors to internet firms.
Some of the major players eyeing IPOs include Walmart-owned Flipkart, digital payments giant PhonePe, and hospitality firm Oyo Hotels, reported Business Standard.
India, which was the world’s second-largest IPO market last year, has seen a slowdown in listings. However, a report by investment bank The Rainmaker Group suggests that many startups have now found a balance between rapid growth and profitability, making them more viable for public offerings.
Stronger Financial Health Compared to Earlier IPOs
Startups currently planning to go public are in a better financial position than those that debuted in 2021 and 2022, Kashyap Chanchani, managing partner at Rainmaker explained.
During that period, several high-profile IPOs struggled post-listing. Payment giant Paytm, for instance, has seen its stock price plummet by about 63 per cent since its market debut, while beauty retailer Nykaa is down by 4 per cent.
Chanchani has played a crucial role in helping Indian start-ups secure $1 billion in equity last year. “The financial health of the startups due to list in the next two years is materially better than the companies that listed previously. Two-thirds of these firms are already profitable, and they are also doing a better job with transparency,” he explained, as quoted by the report.
While Rainmaker has worked with notable startups such as Oyo and Swiggy in securing fundraising deals, it does not provide IPO advisory services.
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Challenges Amidst Market Volatility
Despite the optimism, the Indian stock market has faced challenges. The number of share sales in the country dropped by 34 per cent in the first quarter of this year, reflecting broader market uncertainties. The NSE Nifty 50 Index, which had enjoyed a nine-year rally, began losing ground in late September amid concerns over slower economic growth and downgraded earnings projections.
Proceeds from IPOs, block sales, and share placements in India also fell significantly, dropping to $7.1 billion in the first quarter—less than the amounts raised in Hong Kong and Japan.
However, Chanchani remains confident that deal activity will accelerate in the coming months, with major IPOs on the horizon. Among the anticipated listings are LG Electronics Inc.’s Indian unit, which could raise up to $1.7 billion, and electric-scooter maker Ather Energy Pvt., expected to secure around $400 million.
Exit Route for Investors, But Valuation Concerns Persist
The IPO resurgence offers a crucial exit strategy for major investors such as SoftBank Group Corp. and Prosus NV. Masayoshi Son’s SoftBank Vision Fund holds stakes in companies like Oyo, eyewear retailer Lenskart, and used-car marketplace CARS24, while Prosus has investments in e-commerce startup Meesho and home services platform 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,” Chanchani noted. However, he cautioned that IPO pricing will be critical, as retail investors are likely to push back against overvalued offerings.
Startups planning to go public will also need to address investor concerns over economic slowdown and earnings growth. The expiration of post-listing share lock-ins has triggered declines in some newly listed stocks, adding further pressure to an already volatile market.
India’s Startup Ecosystem Faces Scrutiny
India remains one of the world’s largest startup hubs, trailing only the US and China. Yet, concerns around corporate governance, sinking valuations, and shrinking profits have plagued the sector. Many startups have been forced to scale back their operations, cut jobs, or, in some cases, shut down altogether.
The struggles of Byju Raveendran’s edtech company, once a poster child of India’s startup boom, highlight the risks of over-reliance on investor goodwill.
“One of the key questions that investors ask us often is — can we trust the founders?” Chanchani pointed out.
