In recent times, the Indian IPO market has experienced significant growth, driven by various Government of India (GOI) initiatives such as Make in India and Digital India, along with favourable regulations implemented by SEBI. High foreign investment inflows and growing Private Equity (PE) and Venture Capital (VC) exits through IPOs, rather than the traditional mode of exits by selling stakes to other PE funds or through trade sales, have also contributed to this growth. As a result, many tech-led, Indian-founded but overseas-based startups are reverse-flipping to take advantage of the growing interest of both Indian and global investors in the Indian capital markets. Companies like PhonePe and Groww recently moved their headquarters to India, while others like Pine Labs and Flipkart are reportedly exploring similar options.
The Indian IPO market has seen strong demand for differentiated tech companies in recent years. As India’s start-up ecosystem, particularly in sectors like enterprise tech, fintech, edtech, and e-commerce, matures, many companies have achieved unicorn status. The continued focus of the GOI’s Digital India initiative on building digital infrastructure is expected to further accelerate growth in this space, driving more tech IPOs. India’s tech sector is experiencing an unprecedented boom, supported by these factors.
Some of the most high-profile IPOs in India in recent years have come from tech or tech-enabled firms. In 2021, Zomato’s IPO alone raised ₹9,375 crore ($1.3 billion), marking a turning point for tech companies going public and highlighting the potential of the Indian tech ecosystem to attract significant investor interest. Nykaa, an online beauty and fashion retailer, raised ₹5,351 crore ($720 million) in 2021, signaling robust investor confidence in tech-enabled businesses. RateGain, the first truly SaaS business to be listed in the Indian capital markets, raised ₹1,336 crore ($179.8 million). Since then, companies like Paytm, PolicyBazaar, DreamFolks, Netweb, Zaggle, and Unicommerce have followed suit, showing that the Indian public market is ready to evaluate tech-driven companies in addition to the traditional IT services businesses.
In recent years, the startup ecosystem has undergone a notable shift, with investors and founders increasingly focusing on financial sustainability and profitability rather than burning capital to raise newer, larger rounds. This shift reflects a more discerning approach, influenced by tight monetary conditions, high inflation, market volatility, global economic slowdown, and increasing regulatory scrutiny. This focus on profitability has enhanced the IPO-readiness of startups, as public market investors typically seek more mature companies with proven revenue models and a clear path to operational profitability.
Why Profitable and Sustainable Tech Companies Are in Demand:
Profitability Matters: Tech companies that balance growth with profitability are seen as lower-risk investments. In an environment of rising inflation and global economic uncertainty, investors are moving away from speculative, high-growth, loss-making startups.
Demand for Long-Term Value: Sustainable tech companies with a clear path to profitability are better positioned to weather market fluctuations, making them attractive to long-term investors. Responsible Investing: Environmental, social, and governance (ESG) factors are increasingly considered by investors. Tech companies that offer not only profitability but also sustainability in their operations are viewed as more resilient and future-proof.
The tech IPO wave in India is not a passing trend; rather, it reflects broader economic and digital transformations. As India continues its digital revolution, the demand for sustainable and profitable tech companies will remain strong, positioning the country as a global hub for tech innovation and investment. Fintech, SaaS, eCommerce, Healthtech, and Edtech are expected to be the emerging sectors in the Indian tech IPO landscape. The fintech market is projected to grow to ~$1,500 billion by 2025, India's SaaS ecosystem has seen explosive growth with companies offering enterprise-grade solutions globally, and the Indian e-commerce industry is expected to reach ~$325 billion by 2030. The COVID-19 pandemic spurred massive growth in health and education technology.
Companies that demonstrate sound financial management, the ability to scale profitably, and adherence to responsible business practices while adapting to regulatory expectations will lead the next wave of IPOs in India.
Views are personal. The author is Managing Director-Investment Banking, Equirus