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From Ola Electric and FirstCry to Swiggy, more startups to go public in 2024

The market conditions have turned favourable for Indian startups to go for public listing on the stock markets

From Ola Electric and FirstCry to Swiggy, more startups to go public in 2024

Friday January 05, 2024 , 5 min Read

This year hasn’t been a blockbuster year for Indian startups in the initial public offering (IPO) markets. But experts feel that 2024 might be the comeback year for startup IPOs as founders have understood that market rewards profitability as well as predictability going by past experience.

The year 2023 saw just five companies from the Indian startup ecosystem—IdeaForge, Honasa Consumer (Mamaearth), Yatra, Yudiz Solutions, and Zaggle—getting listed on the Indian stock exchanges. This comes after a not so encouraging performance from Indian startups in 2021 once they got listed, notably fintech company Paytm.

Apart from Paytm, startups like Zomato, Nykaa, Policybazaar, and Freshworks got listed in 2021, and there was much hope riding on them. Unfortunately, none of them provided any blockbuster kind of an opening, and their prices tapered down below their issue price.

However, as of now, startup unicorns such Ola Electric and FirstCry have already filed their IPO papers with market regulator Securities and Exchange Board of India (SEBI).

Eyeing profits

Today, there are several factors which are in favour of startups that are aiming for an IPO. At the same time, there has been a sharp learning curve for startups where the business focus is on sustainable growth with a clear goal of achieving profits.

“The beauty of public markets is that it values a company based on fundamentals and substance,” says Vikram Chachra, General Partner, 8i Ventures, an early-stage venture capital firm.

The past experience is very noticeable with the example of Paytm, which fell on the day of listing—November 18, 2021, and never reached its issue price of Rs 2,150. In fact, Paytm is currently trading at around Rs 600 levels.

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The situation is marginally better for others like Zomato, Policybazaar, and Nykaa, but none of them have provided any stellar returns to the investors.

“The clear message from the markets is they are willing to have unprofitable companies, but they will have to have a predictable path towards profitability,” says Rutvik Doshi, General Partner, Athera Venture Partners.

“As long as that is there, one will be rewarded,” he adds.

The data from financial portal Chittogarh shows there were 58 IPOs in 2023 on the mainboard of the stock exchanges as against 40 in 2022 and 63 in 2021.

In fact, startups which took the IPO route in 2023 like Honasa and IdeaForge have provided stable returns as their share price have not dropped below their issue price, and they have shown profit in their numbers.

More IPOs

Given this situation, there is now a renewed hope that 2024 would turn out to be a much better period for Indian startups as companies like Ola Electric and FirstCry are likely to get listed.

Ola Electric has already filed its DRHP with an aim to raise Rs 5,700 crore, while FirstCry aims to garner Rs 1,816 crore.

There are also others like Swiggy, Oyo, MobiKwik, and PharmEasy, which have lined up their IPO plans for the coming year, according to various reports.

Chachra believes there is a heartening change in the Indian startup ecosystem with many founders now focused on building sustainable businesses.

In addition to this, there is also a growing demand for internet companies in the Indian stock markets, but the supply is limited. “The contribution of internet companies to the Indian economy is not reflected in the stock market,” says Chachra.

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Elevation Capital, in its report ‘Founder Pulse’, noted that founders are viewing the IPO landscape in India for venture funded startups with renewed optimism even after the boom witnessed in 2021.

The venture capital firm further noted that 66% founders believe that there will be more IPOs of venture funded startups in the next five years compared to the previous five, with the optimism ringing even louder (75%) among late-stage founders.

Today, there is also a difference in how the Indian and foreign stock markets, especially the US, behave with respect to these new-age companies. The US market seems a lot more tolerant to loss making companies as long as there is growth, while Indian stock markets place emphasis on profitability.

There is also another dimension now as to how startups can get listed in India, and not looking for overseas listing. The belief is that there are many similar companies like the Indian startups in the West which may not be attractive to a global investor. On the other hand, a global investor will be more interested in those startups which are targeting the Indian market.

Coupled with this, the Indian startup ecosystem continues to face a prolonged funding winter period, where capital is not flowing into the ecosystem as smoothly as before.

In 2023, the total venture funding into Indian startups saw was $10.8 billion as compared to $23 billion in 2022. This has actually made investors asking for lower valuation from the startup founders while the public market is much more favourable in terms of valuations.

Chachra says, “For startups today, there is summer in the public market and winter in the private market.” He adds that they have been telling their portfolio company founders that if they are hitting $50 million in gross profit then one is in the IPO zone.

Given how the Indian stock markets are touching new highs, there is a sharper focus on the small cap stocks—a segment where a startup typically falls into.

The events that unfolded around startups’ listing since the rush of 2021 also serve as an important lesson for everyone.

Doshi says, “It is the startup that has to behave the way the market expects and not the other way around. I would like more startups to list.”


Edited by Megha Reddy