IPO exits may take a hit amid slowdown
Mumbai:
With some companies looking to delay their public listings amid a choppy market, investor exits through IPOs are likely to take a hit this year after recording a big jump in 2024, a joint report by Bain & Company and IVCA (Indian Venture and Alternate Capital Association) said, hinting at a slowdown in broader PE-VC ( private equity and venture capital ) deal activity amid tariff-feuled global uncertainty. "...corrections in Indian public markets since Q4 2024 could potentially temper the IPO exit momentum," analysts said.The value of IPO exits more than doubled to nearly $4 billion in 2024 from $1.8 billion in 2023 as more firms went public last year, riding on a buoyant market, giving investors enough opportunity to cash out.The number of IPO filings so far this year has been lower compared to the same period last year and for companies facing pressure from investors to give them an exit, reduction in issue size and valuation readjustments are on the table as bigger IPOs may not sail through in a volatile market. "From an LP (limited partner) perspective, the exit is a very important path for them to be able to get liquidity. LPs are not seeing the kind of cash they would like to, and for certain funds, there's no choice but to go ahead and seek an exit. Some companies hence are looking at cutting the issue size and tempering IPO valuations," Prabhav Kashyap, partner at Bain & Company told TOI.After a bull run last year, activity in India's IPO market has slowed, with companies like LG Electronics delaying listing plans for its India unit.On Tuesday, EV startup Ather Energy fell nearly 6% from its issue price following a muted listing. Urban Company, which recently filed draft IPO papers, slashed the size of its IPO to Rs 1,900 crore from the earlier targeted Rs 3,000 crore, with the offer for sale (OFS) component that gives exit to investors forming the bulk of the issue.Overall, PE-VC investments rebounded in 2024 after two years of contraction. Investments increased by about 9% year-on-year to $43 billion, helped by growth in VC deals (in terms of volumes). The broader deal environment this year remains cautious, with investors betting more on companies that have higher exposure to local markets. "Deal activity is always impacted when there's any kind of uncertainty. In the case of sectors like manufacturing and pharmaceuticals, investors are assessing the potential impact from tariffs. There is a slowdown in overall investments. The big deals that have been announced this year were in the works and have only been closed now," Kashyap added.
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