The Indian startup landscape is buzzing, with startups being some of the most popular and trustworthy businesses in the public market. However, the buzz is not only because of the big players. Small players or businesses only a few years old but with immense potential or promising revenues are flocking into public markets. This is a reality that India could only dream of just a decade earlier. Now, it’s transforming the Indian financial landscape and providing new opportunities for investors, entrepreneurs, and the country’s broader economy.
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A Surge in IPOs from Startups
In 2023 alone, India witnessed a record number of IPOs from startups. Over 60 companies entered the public market, raising a combined ₹90,000 crore, with smaller companies (with valuations below ₹1,000 crore) accounting for 25% of the total IPOs. Compare this to 2018, when only 18% of the IPOs came from startups, and you’ll see a clear shift in momentum. The startup IPO rush, it seems, has now graduated from unicorns to what some are calling the “minicorn” phase—smaller, nimbler startups seeking public listings to fuel their next growth spurt.
Access to Capital: IPOs as a Strategic Choice
For smaller startups, the drive towards public markets is not just a matter of financial survival; it’s increasingly about scaling quickly in an ever-competitive market. An IPO can provide immediate access to capital, which is critical for a startup’s scaling phase. Raising money through private investors or venture capital funds can take months, if not years, and often comes with strings attached, such as equity dilution and loss of control. On the other hand, an IPO allows startups to raise funds while preserving significant ownership.
A great example is DroneAcharya Aerial Innovations, a Pune-based drone tech startup that went public in 2022. It raised ₹34 crore through its IPO, which, though small compared to tech giants, was enough to scale its operations across five new cities. Importantly, going public allowed the founders to retain more control than they would have in a venture capital scenario.
Regulatory Support: India’s Emerging Investment Infrastructure
India’s evolving regulatory landscape has also played a role in making public markets more accessible to startups. The Securities and Exchange Board of India (SEBI) has loosened several IPO requirements recently, making it easier for smaller companies to list. For example, SEBI reduced the minimum market capitalisation for IPOs from ₹10 crores to ₹5 crores, and startups are now allowed to list even if they aren’t yet profitable—a major boon for tech companies that focus on growth over profit in their early years.
According to NASSCOM, SEBI’s regulatory easing in 2021 led to a 40% increase in startup IPO filings in the subsequent year. The introduction of the Innovators Growth Platform (IGP) further bolstered smaller companies’ confidence in entering the public markets, as the platform specifically caters to young, high-growth companies. Over 30 startups, with market capitalisations ranging from ₹100 crore to ₹500 crore, have successfully listed through the IGP since its inception.
IPOs and Investor Confidence: A Growing Appetite for Risk
Large, established companies have historically dominated public markets, but the risk appetite of Indian retail investors is changing. A new generation of investors, particularly millennials, is willing to invest in startups, understanding that while the risk is high, the potential rewards could be even higher. India has seen a dramatic increase in its retail investor base, growing from 31 million in 2019 to over 60 million by mid-2023, thanks to platforms like Zerodha and Groww, which make investing more accessible.
Data from the National Stock Exchange (NSE) shows that nearly 30% of the retail investments in IPOs in 2023 went towards startup IPOs, compared to just 12% in 2019. The growing confidence in startups stems from the perceived innovation potential, with investors willing to back smaller companies leveraging cutting-edge technology to disrupt traditional markets.
A prominent case in point is SastaSundar Ventures, a health-tech startup that raised ₹50 crore through its IPO in 2023. The company operates in the high-growth e-pharmacy space, and despite being a smaller player, it attracted significant retail investor attention due to the post-pandemic surge in digital healthcare adoption. Its IPO was oversubscribed 2.5 times, reflecting the robust confidence among retail investors.
The Road Ahead: Risks and Opportunities
While the IPO route offers enormous potential, it has risks. Startups entering the public markets are subject to intense scrutiny from regulators and investors alike. The volatile nature of public markets can make fundraising unpredictable, and startups that fail to meet growth expectations could face severe stock price corrections.
Smaller startups are expected to continue their rush to public markets despite these challenges. According to a recent report by Ernst & Young (EY), over 100 startups in India are gearing up for IPOs in 2024, and a significant portion will be smaller companies. This reflects a paradigm shift in how young Indian companies view public markets—not as a distant dream for unicorns but as a viable strategy for scaling and growth.
A New Chapter in Indian Startups
The surge of smaller startups heading for public markets signals India’s startup ecosystem maturing. With regulatory support, an increasingly bold investor base, and the lure of immediate capital, this trend is here to stay. Smaller startups are reshaping how India thinks about entrepreneurship, and public markets are becoming the launchpad for their next growth phase. Investors, both big and small, would do well to pay attention.
