Markets
With The Markets Cracking, Should The Incoming Batch Of IPOs Worry?
Just when India’s startup ecosystem was gearing up for a fresh wave of IPOs, the stock market has decided to throw a curveball. More than 20 startups—big names like Zepto, Groww, Meesho, Lenskart, Urban Company, Pine Labs, Oyo Hotels & Homes, and PhysicsWallah—are all preparing to go public. But with the recent market slump, should these companies be worried?
According to investors, bankers, and founders, the answer is a cautious yes.
The IPO Window Is Still Open, But For How Long?
The beginning of the year was all about optimism. Companies that had long flirted with the idea of going public finally took the plunge, appointing bankers and prepping their paperwork. But now, the mood has shifted.
Since mid-December, the BSE Sensex has taken a 7.5% hit, with small- and mid-cap indices dropping 21% and 19%, respectively. Monday was another brutal day, with the Sensex plunging 857 points to end below 75,000. These numbers have sent jitters across the board, making even the most confident of IPO-bound startups pause and reassess.
“There is definitely a sense that the window to go public is closing,” a venture fund investor admitted. “Public market valuations have been rich for a while, and now, corrections are starting to show. Domestic investors have some appetite for new-age stocks, but foreign investors? They’re pulling out money.”
Valuation Adjustments Are On The Cards
Startups that once commanded sky-high valuations are now facing a reality check. Even companies with strong financials are being forced to revisit their numbers. The founder of a fast-growing consumer internet firm put it bluntly: “We’re preparing under the assumption that markets could fall further by the time we file for an IPO. Our board and investors are open to discussing valuations, and dilution is no longer a taboo topic.”
Essentially, the focus is shifting from growth at all costs to profitability and sustainability. Several startups are now expediting plans to improve their bottom lines, recognizing that public market investors are a different breed compared to the deep-pocketed VCs they’re used to.
Who’s In The IPO Pipeline?
Alongside the heavyweights like Zepto and Groww, Walmart-backed PhonePe has also thrown its hat into the ring, though without a clear timeline. Ather Energy, Bluestone, and WeWork India, meanwhile, have already taken the next step by filing their applications.
Meanwhile, new-age stocks like Swiggy and Zomato haven’t been spared from the broader market correction either. Swiggy is down about 7% from its issue price, while FirstCry and Ola Electric—both high-profile 2024 listings—are struggling, down nearly 30% and over 21%, respectively. Both had already listed at a lower valuation compared to their last private funding round.
Awfis, on the other hand, has been a rare bright spot, trading 75% higher than its issue price.
Insiders say at least two large internet firms hinted at lowering their IPO valuations during a recent conference with public market investors. These firms, valued between $3-5 billion, are adjusting their expectations in light of market conditions. One of them, a clear market leader, is already considering the lower end of its valuation range—still higher than its last funding round but a sign that startups are paying close attention to ongoing market corrections.
Lenskart is planning to file its draft red herring prospectus (DRHP) in May, with many investors targeting April-May for their filings. “We should be there by April as the work is nearing completion. If we price it right, we should be able to ride out the storm—that’s the feedback we’re getting since the market downturn,” said the CEO of a $5 billion startup.
Zepto’s chief executive, Aadit Palicha, has also been meeting mutual fund investors ahead of the quick commerce firm’s IPO later this year.
“Most IPO-bound firms are looking to go public by September-October and are factoring in the latest market trends,” said a senior executive at a fund with two companies in the IPO pipeline. Zetwerk, CaptainFresh, Infra.Market, OfBusiness, PharmEasy, and Boat are also on the list of potential listings.
Of course, not all IPOs will have a smooth ride. “Some of the mid-sized IPOs, or companies where investors aren’t fully convinced about the model, might hit some bumps—it was inevitable,” admitted a top startup founder.
While a public listing remains an option for many, the current market correction—driven in part by slowing growth in the US—is a crucial factor for tech-led businesses. This downturn is also making startup founders more open to lowering valuations in private funding rounds.
“If not now, I don’t know what they’re waiting for before they start adjusting their company valuations,” quipped a top investor with deep ties in India and Silicon Valley.
The Last Bit
