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Indian Start-ups Gearing For Ipos

IBEF, Knowledge Centre

Feb 11, 2021 12:51


Development of start-ups is disrupting the legacy business practices and eating into the market share of various segments. A rising number of Indian start-ups are planning to get listed as the ecosystem matures. 57.7% start-ups are expected to go public within five years, according to an RBI survey conducted between April and November 2020. Start-ups and unicorns (valued at more than US$ 1 billion), such as Pepperfry, Ola, Oyo, Byju's and Paytm, have been planning to debut in capital markets for some time now. Several Indian start-ups such as Zomato, Delhivery, Policybazaar, Freshworks, Flipkart and Nykaa are potentially looking at public markets in 2021.


Rising online gaming industry

The online gaming & entertainment industry is witnessing strong growth in India, driven by restricted movement because of coronavirus-imposed lockdown. The industry valuation reached US$ 90 billion in FY20 from US$ 62 billion in FY19, according to Inc42 Plus estimates. The market is projected to increase by 6.1% in the next five years.

The Indian mobile gaming market was estimated at US$ 1.2 billion in 2020, grabbing the sixth spot globally. In 2021, India, with a user base of ~ 326 million, is anticipated to be among the top five markets for mobile gaming.

Strong Indian tech start-ups ecosystem

From 2020 to 2021, the tech start-ups ecosystem will witness stable YoY growth of ~8–10%. In 2020, start-ups raised significant funding, as Covid-19 fuelled the e-commerce market for fast deliveries of essential goods, food & fresh produce, ready-to-eat foods, and concierge and logistics. Overall funding in tech start-ups almost doubled in 2020. The food segment raised US$ 1.3 billion funding, logistics (US$ 965 million), education (~US$2.1 billion) and e-commerce (US$ 779 million).

Start-ups preparing for IPOs in 2021:

Key Start-ups

Current Valuation


US$ 3.9 billion


US$ 1.5 billion


<US$ 1 billion


US$ 24.9 billion


US$ 1.5 billion


Start-ups joining the unicorn club

In 2020, 12 start-ups including Razorpay, PineLabs, Zerodha and Postman joined the unicorn club, the highest ever in a year. Of the 12, ~ 58% market share was captured by B2B tech start-ups. Paytm held the leading position in India as the most valuable unicorn at US$ 16 billion, followed by Byju's.

NASSCOM is positive that the start-up IPO will expand in 2021, with many major players (E.g., Freshworks, Druva, PolicyBazaar and Delhivery) planning to go public. Tech and new start-ups are anticipated to fuel growth at a CAGR of 40–45%. In 2021, India is set to have a strong unicorn club of more than 50.

E-commerce major Flipkart, food technology start-up Zomato and furniture e-tailer Pepperfry are also preparing to go public in 2021.

Nykaa, which was founded eight years ago, is expected to be India’s first online beauty marketplace to launch an IPO (US$ 3 billion) in 2021.


Strong rebound in IPO activity

In the fourth quarter of 2020, India registered 19 IPOs (including SMEs; US$ 1.84 billion) with Indian Stock Exchanges (BSE and NSE) versus 11 for the corresponding period last year. According to EY India IPO Trends Report: Q4 2020, India ranks ninth globally in terms of the number of IPOs in 2020, with 43 IPOs raising US$ 4.09 billion.

In the IPO markets are experiencing strong momentum and increased demand from businesses across industries seeking to raise capital in the near term. Further, businesses are confidently predicting guidelines for direct listing in international markets. The market sentiment is optimistic for 2021 to be a successful year.

Increasing technology IPOs

In 2020, more internet and technology businesses went public. Three of the 22 businesses listed in 2020 were Internet and technology firms, up from only one in 2010 when MakeMyTrip made its market debut.

In January 2021, Nazara Technologies Ltd. filed initial public offering documents with the Securities and Exchange Board of India (SEBI), India’s market regulator, and became the first Indian gaming technology company to seek a market debut. For Nazara and its peers, emergence of affordable smartphones and slashed mobile data rates (for 1.3 billion people) were the growth enablers. The company's website hosts many types of content and is involved in e-sports; it has titles such as the World Cricket Championship (in mobile cricket gaming) to its credit.

Government Initiatives

SEBI has proposed new norms for inclusion in the Innovators Growth Platform (IGP) to boost funding from qualified institutional buyers (QIBs) and lead further exits from upcoming start-ups.

  • SEBI published a listing consultation paper on its IGP platform to preserve investor confidence in Indian start-ups.
    • The objective of the transition is to allow QIBs and AIFs to participate in the pre-issue with greater flexibility and help start-ups get credible investors on board before the public offering.
  • The proposals allow current investors and promoters to maintain their special rights on the Board of Directors and keep 25% of the pre-issue capital for one year as opposed to the earlier two-year standard.
  • The consultation paper has also been released by SEBI, considering the upcoming young category of investors who want to buy stocks over gold and other asset classes in high-growth enterprises. There is confidence among young investors who are willing to bet on start-ups versus gold markets and other asset classes. The public markets have significantly matured and now, there is an opportunity for start-up IPOs. SEBI recognises that start-ups do face challenges in going public beyond a point and offer the right exits to investors. The intention of the new proposal is to address such challenges.
  • The only choice for an Indian investor wanting to put money in start-ups is to become limited partners in venture capital funds. They do not manage the fund and choose their portfolio. There is also an option for secondary ESOP (employee stock ownership plan) trading. However, if SEBI’s new proposal come into force, this is likely to change, as more individual retail investors will be positioned to finance start-up IPOs.
  • SEBI also proposed that start-ups should be allowed to allocate up to 60% of the issue size on a discretionary basis prior to the issue and exemption of Category II Alternative Investment Fund (AIF) investors from the six-month, post-issue lock-in requirement. Family trusts have also been recommended to be included in the definition of accredited investors.


India's IPO market recorded significant growth in 2020 and the trend is likely to continue in 2021. The market growth in FY20 increased 2.25x to Rs. 45,000 crore (US$ 6.16 billion), up from Rs. 20,300 crore (US$ 2.78 billion) in FY19.

There are certain growth opportunities that push start-ups to raise funds through IPOs and provide a healthy exit for investors. SEBI's new standards such as efficient migration to the main board, reduced holding time and special rights have made IPOs more attractive.