Chasing exits, finding gravity: What India’s IPO boom reveals about investor appetite

Since the start of FY22, investors have snapped up shares of the 23 startups that went public with initial public offerings (IPOs) of ₹1,000 crore or more. The July 2021 IPO of Zomato, the online food ordering and delivery service, was the inflexion point marking a unicorn startup’s entry into the public markets at which things started looking up, while One 97 Communications, better known by its brand Paytm, holds the record for size (₹18,300 crore, in November 2021).

To date, the Top 10 public issues of startups have offered shares worth a total of ₹68,523 crore. A significant portion came from OFS, or the offer-for-sale component, enabling investors to find an exit through public markets. For example, in Paytm’s issue, ₹8,300 crore came from fresh shares and ₹10,000 crore from OFS.

Some startups are also using a “confidential pre-filing” route offered by the market regulator to startups that wish to keep their financials and business model a secret. Last November, Zomato’s rival Swiggy made its IPO after filing confidentially with the Securities and Exchange Board of India. (Tata Play, the content distribution platform, which was the first to take the confidential filing route in November 2022, withdrew later, and so did OYO, the budget hospitality chain, which filed through the same route in 2023 and withdrew in 2024.)

InnoVen Capital, a leading debt financier, reports that nearly 73% of the founders of 100 startups it surveyed indicated that a domestic IPO would be their most likely exit strategy. This number has been going up: from 58% in 2021 to 63% in 2022 and 64% in 2023. The startups surveyed are backed by venture capital (VC) funds or private equity (PE).

The survey also showed that only 19% were interested in mergers and acquisitions in 2024, down from 22% in 2023 and 28% in 2022. Interest in IPOs abroad also declined.

The survey found that IPO optimism was significantly higher among founders in the enterprise software-as-a-service (SaaS) and fintech segments than among founders of consumer companies, who were open to both IPOs and M&A/secondary sales as exit modes.

Rajat Tandon, president of the Indian Venture and Alternate Capital Association (IVCA), says investors are looking forward to IPOs by new-age companies, but are approaching them with some lessons learnt. IVCA has over 200 VCs and 290 alternative investment funds as its members.

Tandon says that 13 startups raised over ₹29,000 crore ($3.4 billion) via IPOs in 2024, and the number is expected to increase in 2025. According to consultancy EY’s IPO Trends Report, India accounted for nearly a quarter (22%) of global IPO activity in the first quarter of 2025. “With 62 IPOs raising a total of $2.8 billion, India remains a leading destination for companies seeking to go public, even amidst a backdrop of global market uncertainties,” the report says.

However, India’s overall IPO activity was down approximately 20% from the previous year, reflecting cautious investor sentiment and global financial uncertainties.

Investors are now seeking governance, realistic valuation, and business models that can withstand public market scrutiny. “The disconnect between private and public market valuations has also led to more conservative pricing… At the same time, growth and credit investments are gaining ground—growth capital now accounts for nearly a third of all alternative investments, and credit is emerging as a viable asset class to support expansion without diluting equity too early,” Tandon says.

Anuj Bhargava, MD, Lightspeed Venture Partners, a venture capital firm, says investors will pay premium valuations only for those with sustainable economics. Bhargava, whose company was one of the early backers of OYO, says the recent IPO activity reinforces the belief in the strength of the Indian public market.

“DIIs (domestic institutional investors) have emerged as the dominant force in recent IPOs, particularly over the past two years,” says Bhargava. “Their growing participation signals a structural deepening of Indian capital markets, reducing dependence on foreign institutional capital. The tech IPO landscape has evolved to focus more on profitability and predictable financial performance, and not just growth,” he adds.

While DIIs and mutual funds have been active investors, they have become wary about post-listing price corrections. For example, Paytm was trading at around ₹871 (as on June 20, 2025), against its list price of ₹1,955. Similarly, Nykaa, a beauty and lifestyle retailer, which listed as FSN E-Commerce Ventures at a 79% premium to its issue price of ₹1,085-1,125, was trading at around ₹197. On the upside, some, like Eternal Ltd (Zomato), CarTrade, and Digit Insurance, have not disappointed.

Brokerage houses, wealth advisors, investment bankers and retail investors are taking a more nuanced look and studying more indicators for the IPOs coming up.

Bajaj Broking Research says investor sentiment was buoyant in FY22, driven by excess liquidity and optimism surrounding India’s digital economy. This enthusiasm has gradually cooled. And DIIs have become more discerning, participating only in IPOs with a clear path to profitability and reasonable valuations.

The brokerage says that foreign institutional investors (FIIs), once active participants in anchor books and large IPOs, have scaled back their participation after facing losses in several high-profile listings, .

Akshay Gupta, founder and CEO, Prime Research and Advisory, notes that even retail investors are now cautious. Gupta says some startups that secured unbelievable valuations are now watching their shares struggle in the dumps. Prime Research provides investment banking and advisory services.

Gupta says that many investors, both retail and institutional, paid premium prices in IPOs of companies that claimed to be first-of-its-kind, technology-focussed businesses. “Institutional investors come in with a herd mentality, and retail investors follow. While for them (institutional investors) it may be 2-3% of their portfolio, for retail it may be 30-40%,” says Gupta.

His advice to retail buyers: look at diversification rather than trying to make a quick buck from these IPOs.

Ajay Garg, Founder and MD of Equirus Capital, a financial advisory firm, advises that investors with a big appetite should not take a short-term view. Garg began at DSP Merrill Lynch and later started Equirus with seed money from billionaire Rakesh Jhunjhunwala, India’s best-known stock investor, who passed away in 2022.

Garg recalls that during his time at DSP around 1996, there were approximately 5,500-6,000 companies listed on the BSE, and over the past 28 years, about 3,500-4,000 companies have been added to the list. “Today, if I’m making a portfolio for a new client on the wealth side, there are not more than 500-600 names which I will touch, which is basically 5-6% of companies in the universe.”

Garg says that some of the performance and governance issues of startups that ran into trouble after their IPOs cropped up because they were trying to second-guess the exit timelines of their PE/VC backers, which incentivised behaviour to shore up valuation and returns. Their management focussed on short-term metrics.

Management must reset the way it thinks, says Garg. “From trying to be a sprint runner, you need to become a marathon runner,” he says adding that companies that are following this while approaching the public market are winning and will continue to win. “And managements that still believe in the sprint mindset will be in the set that will not make it,” he adds.

That said, VCs are optimistic about the Indian market. Vishal Gupta, Partner at Bessemer Venture Partners, who has seen nine portfolio companies go public, says that building robust, long-term companies that can thrive amid the scrutiny of public markets takes time, effort, and patient capital.

“There is no fixed framework for this (exit), and every company is a snowflake. We’ve stayed invested in a number of our portfolio companies post IPO,” he says. The U.S. venture capital firm, which raised $350 million for its second India fund in March, was among the early backers of Swiggy.

Despite increased volatility in recent months, the overall trend is that of a public issue market maturing, receptive to well-governed, fundamentally strong businesses, which is leading to many more PE/VC-backed companies listing in the public markets.