Indian startups didn’t get much love from private investors in 2024 but they got a warm welcome from the public market.
13 startups became publicly listed entities this year. Major names in the startup ecosystem, including Swiggy, Ola Electric and FirstCry, made successful debuts on the stock exchange and the year ended with the listing of digital banking platform MobiKwik.
“Startups feel that this is the right time for them to go public, as the public markets today are valuing these companies much higher than private companies,” says Vikram Chachra, founding partner, 8i Ventures.
The year 2024 has been a huge learning curve for the Indian startup ecosystem, with 2021 not having an encouraging experience.
Four startups, Zomatao, Nykaa, Policybazaar and Paytm, listed on Indian stock exchanges in 2021, but the performance of their stocks did not meet expectations – there was no appreciable increase in their prices. In fact, Paytm’s share price actually crashed on its first day of listing.
There were several reasons for this lukewarm response: unrealistic valuations, a lack of clarity on financial performance standards, and, most importantly, a lack of effective storytelling.
Startups that went public in 2024 seem to have absorbed the lessons of 2021 well. There were no big valuation expectations, and the shares were priced realistically.
Startups like Swiggy and FirstCry have not sought high valuations with their initial public offerings (IPOs). FirstCry was valued at about $3 billion, the same as its valuation in its last venture capital funding round. It was the same case with Swiggy, which was valued at $11.3 billion at the time of its IPO.
Some like Ola Electric and Mobikwik lowered their valuation expectations.
Ola Electric’s IPO was valued at $4 billion, as opposed to its valuation of $6.4 billion in its last private round of funding. MobiKwik saw its IPO valuation slashed to around $250 million from its peak price of $950 million.
“The Indian startup ecosystem is now very mature, and the capital market has treated them well,” says V Balakrishnan, chairman of early-stage venture capital firm Xfinity Ventures.
Realistic pricing paid rich dividends for startups that went public in 2024. The stock price of most companies did not fall below the IPO listing price.
Although the price of Ola Electric fell below the IPO listing price, it has seen a recovery since then.
This is in contrast to what happened in 2021, where there was no significant increase in share prices of listed startups.
Today startups – even those with less than ₹100 crore in revenue – are able to get listed on stock exchanges, and they are raising relatively small amounts from the market.
A good example is SaaS startup UniCommerce which raised Rs 277 crore.
Given these favorable conditions, many more startups are waiting to get listed next year.
Online jewelery brand Bluestone and logistics firm Ecom Express have filed their initial IPO draft documents with the stock market regulator. There are also other startups actively looking to get listed soon – Zetwerk, Meesho, Urban Company, Zepto, Pine Labs, and Groww, to name a few.
Advantages for Startups Going Public
Once a startup goes public, it is relatively easy to raise capital through various means such as loans and institutional placements – unlike venture capital funds, where startups have to seek multiple permissions and approvals from various investors.
For example, Zomato, which went public in 2021, managed to raise $1 billion in November 2024 through a qualifying institutional placement.
Real wealth is generated for founders and employees when startups become publicly listed companies. They have the freedom to sell shares whenever they need. This is not easily possible in an enterprise-supported environment.
India’s digital economy is expanding rapidly, fueled by Internet-based startups. However, their presence in the stock market is negligible now.
According to Chachara of 8i Ventures, digital companies only account for about 1.5% of the country’s stock market capitalization and this is not an accurate reflection of their contribution to the country’s GDP. He believes there is enough headroom for digital startups in the stock market as investors are willing to become shareholders in it.
Challenges ahead
However, apart from the opportunities, there are also many challenges ahead for startups going public in 2024.
The biggest question is how they will deliver on financial metrics, especially profitability. If they are not able to deliver, their stock price could see a steep slide, which is what Honasa Consumer has seen.
Zomato, on the other hand, now enjoys a market capitalization of around $27 billion, up from $11 billion three years ago, and this is largely due to its encouraging financial performance.
Balakrishnan of Xfinity Ventures believes that 2024 is the time for some upside in the stock market.
In the last one year, the BSE Sensex has moved from 71,000 points to 79,000 points. At one point, it even came close to the 86,000 mark.
However, the current situation is different as the stock market price continues to fall. The BSE Sensex has fallen by 6,000 points in a period of four months.
Given the current downturn in the stock market, startups will have to deliver on the financial metrics of growth and profitability for their share price to rise or remain stable, says Balakrishnan.
Having said that, Indian startups are on a very stable ground when it comes to getting listed on the stock market in 2025.
Public markets now have a better understanding of how startups operate and see long-term prospects in them.
Chachara says, ‘In the private market, investments are made in the winter, but in the public market, the sun shines.