Explained: Why Indian Startups Are Catching The IPO Fever

India is at the cusp of the IPO revolution, with the startup ecosystem witnessing a flurry of IPOs in 2021. From Zomato, Paytm, Policybazaar to Nykaa, a strong pipeline of IPOs have been attracting everyone¡¯s eyeballs. However, what¡¯s the reason behind this rising IPO fever amongst startups? Why suddenly they feel that this is the opportune time to push the accelerator? Read on as we try to decode the four possible reasons behind the rising number of startups floating their IPO in recent times, especially after the last year's market crash of March 2020.

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First, let's be clear that this IPO fever is not restricted to tech startups, with the IPO bug biting startups and other big companies across various domains, like small finance banks, asset management companies, e-commerce startups, insurance companies, etc. It¡¯s like everyone is telling SEBI- We¡¯re ready to go public!

One possible reason for so many companies filing IPOs right now, is that a lot of money is floating right now. Wondering how? The central bank (RBI) has been pumping new money into circulation in the hopes of alleviating some of the aftereffects of the pandemic, which badly struck the economy in the past 2 years. This pumped money enters the banking system and eventually makes its way into financial markets?, ?mostly in the form of stocks. And that means there¡¯s ample amount of money floating around in big institutions that have the financial muscle-power to invest in IPOs. So, basically, startups are being confident about generating substantial interest if they were to go public right now, which has been quite evident from the way some IPOs have boomed.

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Next reason is - the market is already riding high on a bull run, thanks to the strong comeback post the March 2020 market crash.

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So, stocks are on the up, which is taken as a positive sign by companies to go for IPO. Even if a startup has not been profitable, or in fact is a loss-making entity, this bull run holds the potential to incentivise investors to pour in new money, with investors probably thinking let's go where the wind takes us, thanks to the market momentum. That's also probably been the reason for many startups even commanding higher valuation than they originally expected.

Third, many startups and their business models have benefited from the pandemic-induced lock downs. With their finances being much more robust now, it again makes a case to go for an IPO. While those companies might have anyway aspired to go for IPO someday, they did it sooner as the pandemic expedited this initiative.

Last but not the least, regulator SEBI has been playing its role as well, by working towards making it easier for startups to get listed in India. A big move has been when SEBI introduced the Innovators Growth Platform to facilitate listing of new-age startups few year back, and even after that, it has made other necessary changes to make it easy for Indian startups to list domestically. In fact, it's believed that SEBI may continue to push reforms to make the road easier for startups. But that's a wait-and-watch game, and it remains to be seen what further steps are in store in favour of startups.

All in all, there have been not one but multiple factors at play in the Indian startup ecosystem, which have contributed collectively to this IPO rush. And its not over yet, with many companies still lined up to roll out their IPO in the coming months.

Also Read: Things To Know Before Investing In Equities Now That Markets Are Soaring

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