Start-ups line up for IPOs amid bullish market, investor demand

Start-ups are eagerly preparing to list on the stock exchanges driven by a thawing funding winter, a shift towards profitability, and growing investor interest. Compared to the US, where companies typically need at least $250-$300 million in revenue to go public, India’s regulatory landscape is more flexible, requiring only $100 million. This relaxation allows start-ups to reach the public markets earlier in their growth.

Office space provider BHIVE, for instance, plans to raise about ₹800 crore through an IPO in the upcoming financial year. Recent tech IPOs, including those by Zomato, Nykaa, Paytm, and others have demonstrated strong investor confidence in technology-driven businesses, noted BHIVE’s Founder and CEO, Shesh Rao Paplikar. “There is more money in the Indian market, multiples are good, and there is a lot of respect for profit-making companies. After evaluating the dynamics, we did feel that going for an IPO is the right thing for us,” he added.

Growth of local capital

One key trend supporting India’s IPO wave is the rise in domestic savings, which has led to a stronger base of Indian investors. Traditionally, foreign institutional investors (FIIs) play a central role in funding the Indian market, but today’s growth is increasingly backed by Indian capital. Start-ups in India have historically depended on venture capital in their later stages to drive expansion. Now, however, venture capitalists are more inclined to back start-ups in their early stages or just before an IPO.

Abhishek Prasad, Managing Partner at Cornerstone Ventures, observed the IPO potential within the country’s start-up ecosystem. “India has 117 unicorns and all of them need IPOs in the next three-five years. This is a first for our market and an exciting time for the ecosystem,” he noted.

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Digital adoption

As India’s digital adoption continues to grow, tech companies are projected to capture a larger market share and increased valuation. Vikram Chachra, Founding Partner of 8i Ventures, remarked on this shift, noting, “India’s retail GDP is digitising rapidly, but that’s not showing up in the market cap yet. Financial services reflect their GDP share in the m-cap, but internet companies make up just 2 per cent of India’s market cap. That’s absurdly low, and I expect this will correct to 10 per cent, maybe even 15 per cent, as the markets mature.”

Another unexpected effect of the recent funding winter has been increased competition between venture capital firms and the IPO market. As venture capital firms near the end of their fund cycles, they are under pressure to provide returns to investors. IPOs — relatively rare for Indian start-ups in the past — have become an effective exit strategy.

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According to Chachra, new-age companies are now going public with revenue run rates as low as $50-70 million, and public market investors are rewarding high-growth, profitable start-ups with valuations often surpassing those in private markets. “This trend is expected to continue as long as these small-cap IPOs sustain a strong post-listing performance,” he added.

Shifting base

With bullish public market sentiment, dozens of Indian start-ups that once chose to be based abroad are now queuing to return home due to better initial public offering prospects.

Razorpay, Pine Labs, KreditBee Zepto, Eruditus and InMobi are flipping back in the coming months in preparation for eventual IPOs. Walmart-backed digital payments firm PhonePe and online investment platform Groww have already engineered a reverse flip.

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Research from Redseer forecasts a significant spike in IPO-ready companies by FY28, fuelled by an increased emphasis on profitability. In 2024, IPOs by Indian start-ups, including Ola Electric and FirstCry, raised $9.17 billion in the first nine months, nearly doubling the $4.68 billion raised in the same period last year, according to data from LSEG.

As the Indian IPO landscape continues to evolve, it is set to shape the next phase of growth for the start-ups, supported by robust domestic capital, favourable regulatory conditions, and investor enthusiasm.