Despite a challenging macroeconomic environment, India has the potential to see approximately 80 public listings in the next five years if startups take a focused and goal-oriented approach to their listing journey, according to a Redseer Strategy Consultants report.
According to the report, approximately 19 startups in India recently went public, with some of the notable ones including Delhivery, Tracxn, and Sula Vineyards, among others. It anticipates that, with 9 startups having already filed their draught red herring prospectus (DRHP) with the regulatory body, and another 10 working on their DRHP draughts, over 80 startups will consider going public in the next five years.
“Whatever the goals may be, you have the time and scope to achieve much better outcomes before the IPO and showcase it strongly,” Rohan Agarwal, partner at Redseer Strategy Consultants said.
Agarwal went on to say that startups should prioritise metrics such as market leadership, a visible and addressable market, multiple use cases, predictable revenue, high operating leverage, sustainable unit economics, and a clear path to profitability.
Redseer Consultants also sees growth potential for technology and new-age companies, despite the fact that these entities currently account for a much smaller share of domestic public market capitalization. While technology or new-age players account for approximately 25 per cent of the market cap in the United States, they currently account for only 1 per cent of the market cap in India.
It did, however, observe a steeper decline in the stock performance of Indian technology IPOs when compared to other consumer companies. One of the key reasons for the more pronounced decline, according to the report, is the worsening macroeconomic environment.
According to the report, while traditional IPOs in India saw a milder drop in valuations, falling to about 1.2-2.9 times their listing valuation, tech/new-age listings were hit even harder, falling to about 0.2-0.9 times their IPO valuation.
Coller Capital, in its Global Private Equity Barometer, highlighted that volatility in the global macroeconomic environment reduced venture capital companies’ interest in technology investments, as shared by nearly half of the limited partners (LPs) surveyed for the report.
According to a report by market intelligence platform Tracxn, funding in the tech sector will also be hit in 2022. While overall funding volumes in India fell about 35 per cent in 2022 (until December 5), fintech and edtech were among the worst hit, with funding dropping 57 per cent and 39 per cent, respectively.
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