Startups with upcoming IPOs in the next 2-3 years

Although most large Indian startups are far from an IPO, there are some we expect to go public in the next few years. Many of these have already achieved Unicorn status. But, with the current economic slowdown, there is every chance that some startups may retreat on their path towards IPO.

And even though startups have received private funding, the ecosystem is still not steady. Thus, Indian startups have yet not been able to mop up funds through the IPO route. But as I said, this could be changing. For example, take Zomato for instance. Recently, Zomato secured over $250 Million funding. The CEO of the company, in a letter to employees, stated that they are planning to take Zomato to an IPO next year.

This could be true for others as well. We expect some such as Freshworks, Policybazaar, and Nykaa to go public in the next few years. There are undisputed reports of Lenskart, Byju's, Paytm, Ola, and grocery giants Bigbasket and Grofers to go for an IPO within the next 5 years. Even non-unicorn startups, like Pepperfry and Milkbasket, may try their luck in India’s capital market.

Not only that, but they will have government support as well. For example, BSE has launched its startup listing platform in December 2018. It facilitates funding for deserving startups by enabling them to raise capital from the market. The facility received its first listing after 8 months.

What has stopped them still?

While we have heard talks of IPOs all through 2019, and 2020, none of India’s unicorns meet public listing guidelines in India. They have to return profits for at least three years.

For example, Paytm is struggling to maintain its market leadership with rivals Google Pay and PhonePe in the market. It had 165% losses in the last financial year while revenue increased marginally at just 8.2%. Paytm’s parent One97 Communications posted Rs 3,959.6 crore in net losses for the fiscal year ending March 31, 2019, against Rs 1,490 crore for the same period in the previous year.

On the other hand, food-tech startups, Swiggy and Zomato are locked in an expensive market share battle. Why expensive? Because their competition has resulted in higher losses. Zomato reported a loss of $294 million (Rs 2,058 crores) in the last financial year. Alternatively, Swiggy reported that its loss widened six-fold to Rs 2,345 crore in the FY 2019.

Ride-hailing unicorn Ola is facing similar problems. Similar story for Oyo as it still has to prove that its business model is profitable.

Secondly, for a direct listing, the exchanges require that the promoters should contribute at least 20% of the total PUC of the company. And as this is not the case for most of the Indian unicorns, the IPOs are a pipe-dream for most startups.

What startups may go for an IPO in the next few years?

Looking at their net losses, the losses of the top tech unicorns paints a worrying picture when it comes to their financial health. But this perhaps will resolve in 2-3 years as markets blossom again. Nevertheless, IPO would let these startups' founders retain back their ownership.