Bengaluru: Indian startups planning to go public this year will likely have to review their issue sizes and valuations as US President Donald Trump’s decision to impose tariffs on various American imports has sent equity markets into a tailspin, several investment bankers told Mint.
More than two dozen startups are likely to go public in the coming months. These include potential billion-dollar issues by companies such as Groww, Lenskart and Zepto, and smaller ones by Ather Energy, BoAt, Bluestone, Captain Fresh, Fractal, Infra.market, Ofbusiness, PhysicsWallah, PayU, Pine Labs and others. Hexaware Technologies listed on the bourses on 12 February, while Tata Capital and HDB Financial Services are looking to list later this year.
This is a significant increase from the 13 startups – including Swiggy, Ola Electric, FirstCry and Blackbuck – that went public last year. With venture capital and private equity investment slowing down over the past few years, new-age companies are increasingly turning to the public markets for funding.
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The benchmark Nifty 50 is currently down 12.5% from its all-time high from last September amid heavy selling by foreign institutional investors (FIIs). Just a month and a half into 2025, FIIs have pulled out more than ₹88,139 crore from Indian equities. Meanwhile India VIX, the market’s ‘fear gauge’, which measures its expectation of future volatility based on Nifty 50 options, has spiked 20% since the start of the year, indicating strong risk aversion among investors and traders. On Tuesday, Trump substantially raised tariffs on steel and aluminum imports to a flat 25% “without exceptions or exemptions”, causing equities markets to slip further.
Bhavesh Shah, managing director and head of investment banking at Equirus, said, “Market corrections are important to bring about some level of discipline in valuations. Hence, startups will certainly need to recaliberate these valuations to what the (public) markets will take rather than what they got from private investors.”
While there will always be an appetite for strong, growth-oriented companies, startups will have to figure out how to become profitable, Shah said. He added that this could require a change in orientation from growth at any cost to profitable growth.
Bulls hit a wall
After a slowdown in the September quarter, there was a significant market correction in the December quarter, which also turned out to be one of the busiest deal-making periods for capital markets in recent times, executives at Kotak said.
“The slowdown is clearly perceived, valuations have been adjusted, and IPOs are being priced according to the market’s new reality,” V Jayasankar, managing director at Kotak Investment Banking, said at a conference in January.
Jayasankar estimated about 50 companies plan to go public in 2025, looking to raise around $35 billion in total. “Of course, this pipeline will continue to grow, and therefore our expectation is if $20 billion was raised in IPOs last year, it could be anywhere from $35 billion to $40 billion in 2025. It depends on what we see during the year, but it’s possible that IPOs will surprise us significantly,” he added.
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S Ramesh, managing director and chief executive at Kotak Investment Banking, added, “We have known for several decades that when there is volatility in the primary market, IPO discounts do tend to go up a little.”
“On the bright side, our IPO market and primary market, in general, are factored around the institutional market. And institutions are doing a pretty good job of negotiating valuations,” he said, adding that rational IPO pricing is crucial to the market’s long-term health.
Lock-in periods set to expire
Meanwhile, startups such as Swiggy and Ola Electric that listed last year are currently trading below their listing price. Swiggy, which listed at ₹420 a share, is currently trading at ₹342, while Ola Electric stock is currently trading around ₹65, down from its listing price of ₹76. As some of their lock-in periods are set to expire in the coming weeks, major investors may sell shares, causing the stocks to drop further.
While there is likely to be some selling pressure after these lock-in periods expire, investors can still earn good returns over the long run from fundamentally strong businesses that are fairly priced, said Vikram Gawande, growth & exits lead at Blume Ventures, an early-stage venture-capital firm.
“I believe that 6-12 months is too short a period to gauge the ability of a company to generate post-IPO returns. I think fundamentally strong companies will be able to provide good returns over the long run if they continue to deliver their vision and growth story,” he said.
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While lock-in expiries might create some volatility, Gawande said if investors have already sold a part of their stake before and during an IPO, they could ride the stock for a while and co-ordinate sales in well-informed block trades.
Amid tough market conditions, those looking to invest in upcoming IPOs could also be staring at losses in the short term, bankers noted, as the post-issue pricing and financials are often a function of how well they perform in the public markets as well as macroeconomic conditions.
“While these IPO cycles will go up and down, entrepreneurs who want to build a company for the long term and access public markets not just for liquidity but also future capital will continue to go down that path,” Gawande said.
