Temporary Market Shifts No Deterrent for Start-Up IPOs if Fundamentals Strong: Deloitte's Sunder Iyer

The growing interest in start-up IPOs in India is driven by a combination of capital lifecycle dynamics, evolving investor expectations, and increased market maturity. As start-ups scale, early-stage investors — including angel, venture capital, and private equity — seek liquidity, and public markets offer a structured exit route. This transition is not merely about valuation milestones like becoming a unicorn; it’s about readiness to operate as a listed entity.

Going public requires a shift in how decisions are made and communicated. The agility of private operations gives way to broader accountability, regulatory compliance, and structured governance. Listed companies must demonstrate consistency, transparency, and the ability to manage performance under public scrutiny.

Start-ups considering IPOs must assess their operational stability, financial visibility, and sectoral regulatory environment. A clear path to profitability, robust internal processes, and a well-articulated equity story are essential.

The IPO buzz reflects both the ambition of founders and the evolution of India’s capital markets. However, the decision to list should be based on preparedness, not momentum.

Timing an IPO in a volatile market is never straightforward. Founders and bankers don’t rely on a single metric, instead, they assess a combination of factors: macroeconomic indicators, investor sentiment, sector-specific trends, and the strength of the company’s equity story. Market dips, like the one seen in 2025, often prompt companies to delay filings or reconsider launch timelines, not necessarily because the business is weak, but because the environment may not support fair valuation or sustained investor interest.

Valuation fluctuations are inevitable, but they don’t always reflect the strength of the underlying business. What matters more is whether the company has a resilient model, communicates effectively, and adapts to changing conditions. A well-articulated equity story — one that the market understands and trusts — can help navigate short-term volatility.

Ultimately, timing an IPO is part science, part judgment. Founders and bankers monitor liquidity trends, institutional appetite, and peer performance, but they also consider whether the company is ready to operate under public scrutiny. If the fundamentals are strong and the narrative is clear, temporary market shifts may not be a deterrent. The goal is to enter the market when the business can be fairly evaluated, not just when valuations peak.

The decision for a company to pursue an IPO shouldn’t stem from last-minute preparation unless driven by compelling external pressures. While the reasons may vary, if the business is fundamentally ready, timing the IPO becomes more of an art than a science. There’s no universally perfect moment — it ultimately depends on the company’s maturity and its commitment to operating responsibly.

A startup may not enter the market at a time that yields the highest possible valuation. It might even deserve more. However, if the business is prepared to undergo public scrutiny and seeks access to patient capital — particularly from high-quality, long-term investors who may hold 2–5% stakes — then short-term valuation concerns tend to carry less weight for such investors.

Ultimately, the decision to go public hinges on two key factors:

- Is the company prepared to operate under the expectations and scrutiny of public markets?

- How do broader market conditions, such as economic cycles and geopolitical factors, affect the business?

For example, if trade-related uncertainty significantly impacts the business model, it may not be the right time to go public. Inspiring investor confidence becomes difficult when the company itself is uncertain about its near-term outlook. On the other hand, if demand is relatively insulated from macroeconomic risks, delaying the IPO solely due to a potential 5–10% dip in valuation may not be justified. In such cases, reducing the IPO size could be a viable path forward.

By the time a company files its Draft Red Herring Prospectus (DRHP), two major developments have typically occurred:

- The board has been reconstituted: It’s no longer just the founders and financial sponsors; independent directors are often added, reflecting the governance standards of a publicly listed entity, especially in high-quality companies.

- Analyst research is already in the public domain: The company has made sufficient disclosures for third parties to form and publish opinions. At this stage, withdrawing from the process becomes challenging unless there’s a genuine business reason.

Consider an automotive company facing supply chain disruptions that prevent access to key raw materials. In such a scenario, postponing the IPO is clearly prudent. Again, it comes back to the core question: Can the company present a credible outlook for at least the next two, four — or ideally six to eight — quarters?

Valuation in public markets is ultimately shaped by demand and supply dynamics — one investor enters, another exits — and the market sets the price. This fluidity means that valuation is rarely static. Over the past two to three years, data shows that several investors entered companies at a certain valuation, say X billion, and the IPO valuation was not significantly higher — certainly not 2X or 3X. In fact, discussions around many companies today have become more grounded and realistic.

The role of social media in democratising IPO narratives cannot be understated. It has become easier to track commentary from six months or a year ago and compare it with current sentiment. The result is a noticeable decline in pre-IPO hype and inflated valuations.

Regulatory oversight has also contributed to this shift. In November 2022, Sebi introduced more stringent disclosure norms. Companies are now required to share with incoming investors all relevant performance indicators, including non-GAAP metrics and internal operating data, if deemed material. This has significantly improved transparency.

Institutional investors and funds — the buy-side — are now more informed than ever. In today’s open economy, access to information is widespread, enabling more rigorous analysis and decision-making.

Another factor influencing valuation and market behavior is saturation within verticals. Consider the quick delivery segment: when only one company was publicly listed, investors seeking exposure to that theme had limited options. Fund managers allocating capital across sectors like food tech, edtech, fintech, and insurtech were often forced into concentrated bets.

Now, with multiple companies — or even proxies — listed within the same vertical, capital allocation is more distributed. This diversification affects not only valuation but also market volatility. It’s no longer just about how much a company is worth, but also about how many investable options exist within a given space.

Retail investor interest in recent start-up IPOs reflects a broader shift in market accessibility and investor behavior. The democratization of investing — driven by digital platforms, real-time data, and social media — has empowered individuals to participate in capital markets like never before. However, this ease of access also introduces “impulsive decision-making”, often driven by sentiment rather than fundamentals.

Historically, investing was opaque and limited to a select few. Today, anyone can invest with a few clicks, but this convenience comes with responsibility. Retail investors must recognize that IPOs are not speculative playgrounds; they represent risk capital that demands informed judgment.

Regulatory reforms, such as enhanced disclosure norms, have improved transparency, enabling better investor evaluation. Yet, the onus remains on both companies and investors to act with maturity. Companies must demonstrate readiness and governance from day one, while investors must assess promoter credibility, industry dynamics, and performance consistency before committing capital.

Market saturation also plays a role. As more companies go public within the same verticals, capital allocation becomes more distributed, influencing both valuation and volatility.

Ultimately, increased retail participation is a positive trend, but it must be accompanied by financial literacy and disciplined investing. The evolution of the market demands that all participants, not just companies, rise to the occasion.

SEBI’s current framework for clearing Draft Red Herring Prospectuses (DRHPs) reflects a maturing capital market. The regulator has significantly raised the bar on disclosures, due diligence, and transparency — aligning with global best practices. Its role is not to prevent companies from going public, but to ensure that investors have access to accurate, comprehensive information to make informed decisions.

Recent innovations, such as confidential DRHP filings and extended pre-listing transparency, demonstrate Sebi’s responsiveness and commitment to investor protection. However, regulation has its limits. The responsibility for maintaining market integrity is shared across all stakeholders — companies, investors, intermediaries, and institutions.

Ultimately, SEBI is doing its part by enforcing discipline and enabling informed participation. The onus now lies with market participants to uphold these standards and engage with the system responsibly.

Sectoral interest in capital markets is cyclical and context-driven. What appears attractive today may not have held the same appeal a few years ago. Emerging areas like defense tech, Agritech, and energy innovation are gaining traction due to evolving geopolitical and environmental priorities. Similarly, consumer-facing businesses continue to attract attention, but they must adapt to changing preferences and avoid over-reliance on single-product strategies.

In fintech, platform depth and resilience are critical. Companies that manage risk, liquidity, and balance sheet exposure effectively are more defensible than those operating as mere intermediaries. The key question is whether a business is solving a meaningful problem within a large and scalable market.

Capital availability is no longer a constraint, the challenge lies in identifying standout ideas with long-term relevance. Sectors once considered promising, like solar energy, may face saturation, while newer areas such as hydrogen or robotics emerge. This underscores the importance of staying attuned to market shifts.

For most investors, participating through professionally managed funds remains a prudent approach unless they possess deep sectoral knowledge and risk tolerance. Ultimately, successful investing hinges on understanding market direction, assessing company relevance, and evaluating the scale of opportunity.

Democratising start-up IPOs in India requires companies to demonstrate maturity, transparency, and accountability well before they enter public markets. This begins with building robust governance structures, ensuring consistent communication, and cultivating leadership that extends beyond the founding team. When companies operate predictably and communicate disruptions clearly, they foster trust — a critical factor in encouraging broader investor participation.

Governance plays a foundational role. It signals discipline and long-term orientation, which are essential for attracting retail investors. Companies must also show a credible path to profitability or sustainable cash flow. While early-stage businesses may not be profitable, a lack of financial clarity can deter participation and lead to valuation corrections.

Equally important is the mindset shift. Once external capital is involved, the company is accountable to all shareholders. This requires a cultural shift toward transparency, responsible conduct, and proactive engagement with the market. Systems and processes matter, but they must be supported by a commitment to operate as a public-ready organisation.

If companies embrace these principles early, IPOs can become more inclusive and trusted. The regulatory framework already supports this evolution — it’s now up to market participants to uphold it.