Private Equity and Venture Capital Firms Reap Rewards from IPO Rush
The surge in initial public offerings (IPOs) has resulted in substantial gains for entrepreneurs and investors, particularly private equity (PE) and venture capital (VC) players. A significant portion of the funds raised from IPOs, as well as offer-for-sale transactions, has flowed into the coffers of these firms. Amidst the IPO frenzy observed between August and September, PE and VC investors raked in a whopping ₹10,000 crore.
IPO Landscape in 2023
In the year 2023, a total of ₹40,773 crore was raised through 46 mainboard public offerings up to the third week of November. Nearly half of this amount, approximately ₹23,714 crore, was generated through offer-for-sale transactions by promoters and existing investors. Among these, PE and VC firms pocketed around ₹10,007 crore across 17 IPOs, as reported by Primedatabase.
Noteworthy IPOs
The year’s largest IPO, Mankind Pharma, witnessed substantial exits by PE/VC investors totaling ₹3,244 crore. Other prominent IPOs such as Concord Biotech, R R Kabel, and Tata Technologies also saw significant sell-offs by PE/VC stakeholders.
Benefits of IPOs for PE and VC Investors
The resurgence of the IPO market serves as a viable exit route for PE and VC funds. Even if they are not directly involved in offer-for-sale transactions, being part of a publicly listed company facilitates potential exits through block deals. Fazal Ahad, Managing Director at Merisis Advisors, emphasizes the importance of IPOs as credible exit channels for investors, particularly in light of the impressive performance of tech stocks listed in recent years.
Secondary Market Activity
The bullish stock market trend since August has witnessed numerous block deals by large PE/VC investors. Notable transactions involving Softbank, Tiger Global, Bain, and TPG saw stakes being sold in leading internet companies like PB Fintech, Delhivery, Zomato, and Paytm.
Future Outlook
Industry experts view the heightened activity in primary and secondary markets, coupled with robust exits, as indicative of maturity in the VC ecosystem. Looking ahead, projections indicate that approximately 30 unicorns valued over $1 billion will prepare for IPOs next year. Additionally, the SME listing route offers opportunities for smaller startups seeking early-stage market entry.
Embracing Public Markets
The transition to being part of the listed universe fosters financial discipline and encourages companies to steer towards profitability. Bhaskar Majumdar, Managing Partner at Unicorn India Ventures, underscores the importance of this transition for startups, emphasizing the growing acceptance of IPOs as exit avenues.
Anticipating Future Growth
As more companies reach maturity, fiscal year 2025 is expected to yield significant gains in exit strategies. In the interim, PE and VC investors are capitalizing on the current market dynamics to refine their exit plans and capitalize on emerging opportunities.
