As India’s startup ecosystem continues to thrive, the outlook for initial public offerings (IPOs) in 2025 is clouded by geopolitical uncertainties and shifting global market dynamics. Companies such as Zepto, PhysicsWallah, and OfBusiness are preparing for public debuts, with Ather Energy also filing its draft IPO papers. However, experts warn that external factors, ranging from global political shifts to local market fluctuations, may impact valuation expectations and the timing of these listings.
Geopolitical and Market Concerns Impacting IPO Strategies
External Factors Weighing on Investor Sentiment
The excitement surrounding India’s burgeoning startup scene is tempered by several macroeconomic and geopolitical developments. As Neha Agarwal, MD and Head of Equity Capital Markets at JM Financial Institutional Securities, explained, global factors such as shifting market dynamics in India, narrowing benefits from China, and the uncertainty brought by Donald Trump’s election win are prompting a more cautious approach to emerging market investments. These uncertainties could affect the valuation of IPOs and the strategies companies adopt in the lead-up to their market debut.
Furthermore, changes in global economic policy—particularly in the United States, where pro-growth measures might be introduced under a new administration—are making international investors more circumspect about placing their bets on emerging markets like India.
Navigating Through Choppy Markets
The Indian market has recently shown signs of volatility, creating a challenging environment for new-age companies aiming for public listings. IPO activity could be influenced by these headwinds, with companies needing to recalibrate their expectations in terms of market timing and valuation. Despite these challenges, India’s domestic fundamentals remain strong, and investment bankers expect that IPOs will continue to be a viable funding route.
Abhinav Bharti, MD at JP Morgan India, acknowledged that external factors could lead to valuation adjustments, but he remains optimistic about the overall IPO activity, noting that the strong domestic market would help companies navigate these challenges.
The 2024 IPO Boom and What’s Next for New-Age Companies
While the IPO market may face new hurdles in 2025, this year has witnessed a strong IPO performance from new-age companies, signaling a positive trend. Startups such as Ola Electric, FirstCry, and Swiggy raised significant funds, underscoring the growing appeal of IPOs for India’s fast-growing tech and consumer sectors.
For instance, Swiggy, the food delivery giant, initially targeted a valuation of $13 billion but revised it down to $11.3 billion due to choppy market conditions. Despite the valuation adjustment, Swiggy’s Rs 11,327 crore IPO became the second-largest public issue of the year, following Hyundai Motor India’s Rs 27,870 crore offering. This robust IPO performance is a strong indicator of investor confidence in India’s startup ecosystem, even in the face of market volatility.
With over Rs 25,000 crore raised by new-age companies in IPOs in 2024, the year has seen the best fundraising figures since 2021. Swiggy’s and FirstCry’s success stories are encouraging more startups to fast-track their listing plans. Many of these companies are also exploring the possibility of re-domiciling to India, a trend that further highlights the growing attractiveness of Indian exchanges for global businesses.
The IPO Outlook for 2025: Technology and Consumer Sectors to Lead the Charge
Investment bankers expect technology companies, alongside firms operating in the consumer and financial services sectors, to dominate the IPO space in 2025. As Gaurav Sood, MD and Head of Equity Capital Markets at Avendus Capital, pointed out, the public markets will remain an attractive option for new-age companies to raise substantial growth capital. As these companies scale up, public offerings provide them with opportunities that private markets may not be able to match in terms of funding potential and visibility.
New-age companies are likely to account for 15-20% of the $10-15 billion expected to be raised through IPOs in 2025. Sood’s insight reflects the growing importance of IPOs as an exit strategy for early investors while also enabling startups to access significant capital for further growth and expansion.
Sectors to Watch in 2025
- Technology: The Indian tech sector continues to experience rapid growth, and companies in this space are expected to be key players in next year’s IPO market.
- Consumer: With India’s burgeoning middle class and growing disposable incomes, consumer-facing companies will remain attractive to investors.
- Financial Services: The continued digital transformation in India’s financial services sector, spurred by fintech innovations, will likely lead to more IPOs in this space.
India’s IPO Market Set to Outperform in 2025
Sudarshan Ramakrishnan, co-head of India investment banking at Goldman Sachs, is optimistic about India’s overall equity issuance in 2025. He expects it to surpass the levels seen in 2024, thanks to the country’s robust economic growth, expanding middle class, and ongoing digital transformation. These factors make India an increasingly attractive destination for domestic and global investors.
India’s economic resilience, combined with a strong demand for IPOs, means that startups can still look to the public markets for substantial growth capital. As the IPO pipeline for 2025 grows, companies will need to adapt to external uncertainties while leveraging the strength of India’s dynamic market.
Conclusion: A Year of Opportunities and Adjustments
The IPO market in India is likely to face some headwinds in 2025, but the outlook remains positive, with strong domestic fundamentals, a growing economy, and a burgeoning startup ecosystem. Companies planning to go public will need to navigate global geopolitical uncertainties and adjust their expectations accordingly.
As more companies enter the IPO market, particularly from the technology, consumer, and financial services sectors, they will be key drivers of growth and innovation in the Indian economy. The ability of these companies to balance external challenges with their long-term growth strategies will determine their success in the upcoming public offerings.
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