Indian Startup Founders, Investors Conflicted About Taking IPO Route In FY24: Inc42 Survey

Amid global market volatility and a decline in the IPO momentum in India and abroad, founders and investors have mixed feelings about their startups going for an initial public offering (IPO) in the financial year 2023-24 (FY24).

As per Inc42’s annual ‘Indian Startup Founders’ Survey’, a little over 50% of Indian startup founders believe that FY24 is not the right time for the startups in the country to get listed, while the rest are in favour of it. 

The sentiment is similar amongst investors, as over 51% of investors are of the opinion that the year would not be favourable for the Indian startups to get listed in the bourses.

The survey saw participation from 150 startup founders and over 50 investors in the Indian startup ecosystem.

Investors largely cited a lack of understanding of startup business models as the main reason behind the negative sentiment towards Indian startup IPOs.

It is pertinent to note that as compared to the listing of 11 Indian startups on the stock exchanges in 2021, only three startups took the IPO route in 2022 amid macroeconomic uncertainties like rising inflation, rate hikes by central banks, fears of an impending recession, and the ongoing Russia-Ukraine war. 

Besides, the sharp correction in the share prices of startups which got listed in 2021, along with global tech stocks, in 2022 also made many IPO-bound startups cautious. This led to startups like PharmEasy, MobiKwik, Droom, Snapdeal either shelving their IPO plans or withdrawing their DRHPs. 

However, as per a report by EY, India was a rare bright spot in 2022 despite the global slowdown and bearish market sentiment. 

In what was an underwhelming year for IPOs globally, the number of deals in India witnessed a 3% increase in volume. Though the proceeds for the year were down considerably, India saw one of its biggest-ever listings with Life Insurance Corp of India (LIC) raising $2.7 Bn this year, the EY report said.

Despite the mixed sentiment about IPOs, a lot of startups like Navi Technologies, Go Digit, ixigo, OYO, Yatra, Capillary Technologies, PayMate, and Mamaearth are in line to list on the exchanges.

Meanwhile, some startups like BYJU’S and Flipkart were earlier considering an international listing instead of domestic, or dual listings. However, as per the Inc42 survey, a majority of Indian VCs believe that public listing in the domestic market is a better option for local startups than international ones.

As per the survey, which was a part of Inc42’s Annual Indian Tech Startup Funding Report, 60% of Indian startup founders found it difficult to raise VC in 2022. Going forward, the negative to mixed sentiment witnessed in 2022 could remain. 

In fact, 87% of VCs believe that the ongoing conservative market sentiment toward startup investments will be carried forward to FY24 as well.

It must be noted that the funding amount raised by Indian startups declined nearly 54% year-on-year (YoY) in 2022, as of November end. The total funding amount raised in 2022 stood at $24 Bn till last month compared to about $37 Bn during the same period last year.

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