From Swiggy to Mobikwik: How 2024's IPO frenzy bolstered the startup ecosystem

“It took Indian startups close to two years to recalibrate business models, cut out unprofitable experiments and concentrate on generating operating cashflows. Once they demonstrated this, they began to tap the IPO markets,” said Siddarth Pai, Founding Partner, 3one4 Capital, a venture capital firm.

While several new-age IPOs such as that of insurtech startup GoDigit (Digit Insurance), traveltech platforms Ixigo and TBO Tek, had a heavy offer for sale (OFS) component facilitating exits for early backers, there were others like Swiggy, which raised primary capital to expand operations and take on rivals. There were also companies such as MobiKwik, which only raised primary capital and did not have an OFS component. 

This year’s startup IPO run is, however, in stark contrast to 2021, where listings were marred by inflated valuations and a lack of clarity on financial performance, investors said.

Four large startups that went public in 2o21, namely Zomato, Nykaa, Paytm, and PolicyBazaar, did not meet expectations after their stocks underperformed in the sessions that followed immediately after listing. In fact, Paytm’s share price crashed on its first day of listing.

On the contrary, 2024 saw even smaller scale startups, which raised modest amounts of money, bring in huge demand.

Software-as-a-service (SaaS) startup Unicommerce, for instance, raised Rs 276.57 crore via its IPO, which was oversubscribed a massive 168-times. Similarly, fintech firm Mobikwik and co-working space provider Awfis, with IPO sizes of Rs 572 crore and Rs 598.93 crore, saw subscriptions of 119-times and 109-times, respectively.

On the small and medium enterprise (SME) front, firms like Trust Fintech, TAC Security, and Menhood have also raised Rs 63.45 crore, Rs 29.99 crore, and Rs 19.64 crore, respectively, market data showed.

The secret sauce for startup IPOs

As many as 10 of the venture-backed IPOs in 2024 have been trading over their issue price. The median premium – of 53 percent over the issue price – is a function of buoyant markets and the fact that more startups are following the age-old adage of leaving value on their first brush with public markets.

It also showed that companies would get investor interest if they left money on the table for retail investors.

“Startups went public (in 2024) at lower values than their previous funding rounds. This single action demonstrated to the markets that there was still value left in the stock, prompting many to invest during the IPO. This signal is underreported, but had an outsized impact on IPOs,” Pai emphasised.

Firms like Ola Electric and Mobikwik took valuation cuts before listing. The Bhavish Aggarwal-led electric vehicle maker listed at a valuation of $4 billion – a 25 percent discount to its valuation of $5.4 billion, during its private fundraise in September 2023. Mobikwik, on the other hand, cut it IPO valuation to $250 million, down from its peak of $950 million a few years ago.

On the other hand, companies including Swiggy and FirstCry did not seek higher valuations at the time of listing. The former’s valuation remained flat at $11.3 billion at the time of listing, while the latter was valued at $2.9 billion, broadly in range with their last venture capital funding.

Along with a more mindful approach, IPO-bound startups also focused on delivering profitability and improved unit economics so they could be rewarded better when they tap the public markets.

“Public markets are becoming attractive for private investors seeking lucrative exits, fueled by growing investor confidence in startups that now enter markets with greater stability in profitability and growth,” said Gaurav Sood, Managing Director and Head – Equity Capital Markets, Avendus Capital.

Funding resurgence

The buoyancy in India’s public markets also played a pivotal role in catalysing a resurgence in startup funding. This came after investor confidence was bolstered by startups exhibiting strong business fundamentals and near-term IPO prospects, investors said.

As such, funding among startups increased 14 percent year-on-year to $10.94 billion in 2024, according to market research firm Venture Intelligence.

A big chunk of this funding increase came from late-stage deals in IPO-bound firms such as quick commerce major Zepto, edtech unicorns PhysicsWallah and Eruditus, beauty brand Purpelle, and cloud kitchen startup Rebel Foods, who managed to raise large rounds this year, Moneycontrol reported earlier.

“Startups with clear plans to go public promise liquidity and demonstrate financial discipline and market maturity—qualities that resonate strongly with institutional and late-stage investors,” explained Anirudh A Damani, Managing Partner, Artha Venture Fund – a micro VC fund.

These companies, he added, typically exhibit strong fundamentals, such as profitability, predictable revenue streams, and transparent governance, which significantly de-risk the investment.

New year, new hope

As the IPO frenzy continues into 2025, investors expect a record 20 or more startups to go public next year. With a simultaneous uptick in pre-IPO funding on the cards, the increased activity in public markets is set to unlock newer pools of capital for startups across the board, investors said.

"The year 2025 will be one of maturity. Today, there are maybe 15 venture backed companies that are public. But when that number triples, and these companies start to show credible financials quarter-on-quarter, the whole ecosystem will get strengthened," Sandeep Singhal, co-founder and managing partner at WestBridge Capital told Moneycontrol.

It is, however, worth noting that the current IPO frenzy also carries risks. Investors note that there is a growing concern about inflated valuations and unsustainable business models sneaking into the mix.

The key to keeping up the current momentum into 2025 would be for startups to concentrate on building sustainable businesses, while reducing the dependency on external capital. “Any narrative not supported by numbers or business fundamentals will fail the public market test,” Pai concluded.