In 2024, the Indian startup ecosystem witnessed a notable trend in exit strategies, with Initial Public Offerings (IPOs) taking the lead. However, experts anticipate a shift towards a more balanced landscape, with Mergers and Acquisitions (M&As) expected to gain momentum in the coming months.
IPOs Dominate the Exit Landscape in 2024
Indian startups have had a successful year with exits reaching over $5 billion through secondary transactions, IPOs, and block deals. IPOs emerged as the primary driver of Private Equity and Venture Capital (PE-VC) exits, accounting for 68% of the total exit value. This surge in IPO activity can be attributed to the high valuations observed in the public market, which made it an attractive avenue for startups seeking to unlock value and provide returns to their investors. In 2024, thirteen new-age companies launched their IPOs and raised ₹29,247.4 crore. This is a significant increase compared to previous years, with only 6 IPOs in 2023, 6 in 2022 and 10 in 2021. Some of the biggest IPOs were Swiggy (₹11,327.43 crore), Ola Electric (₹6,145.56 crore), FirstCry (₹4,193.73 crore), Digit Insurance (₹2,614.65 crore), and TBO Tek (₹1,550.81 crore).
Factors Driving the IPO Wave
Several factors contributed to the IPO boom experienced by Indian startups in 2024. High public market valuations allowed companies to secure substantial capital, fueling expansion plans and enhancing their visibility. Additionally, the IPO route provided existing investors with lucrative exit opportunities through offers for sale (OFS). Companies like Swiggy, Awfis, FirstCry and Go Digit collectively generated $1.6 billion in investor exits through OFS. The IPO landscape was diverse, with companies from various sectors, including fintech, SaaS, logistics, proptech, EVs, e-commerce, foodtech, and traveltech, successfully listing on the bourses.
M&As Expected to Catch Up
While IPOs have been the preferred exit route, a shift is expected towards a more balanced distribution of exit strategies. Several factors are likely to contribute to the rise of M&As in the Indian startup ecosystem. Public market corrections and increased liquidity pressures may make IPOs less appealing, prompting startups to consider M&As as an alternative. Strategic mergers can enable startups to consolidate their market position, access new technologies, and achieve synergies, ultimately enhancing their competitiveness. Furthermore, M&As can provide an avenue for startups to overcome operational setbacks, navigate sectoral challenges, and facilitate leadership transitions.
M&A Activity in 2024
Despite the overall decline in M&A activity in the Indian startup ecosystem, several notable deals took place in 2024. Zomato's acquisition of Paytm Insider for $240 million was one of the biggest deals. The enterprise tech sector retained its top spot for M&A deals with 21 transactions, including BrowserStack's acquisition of Bird Eats Bug, Symphony Technology Group's acquisition of Eka Software and Aurionpro Solutions acquiring Arya.ai.
Looking Ahead
The Indian startup ecosystem is dynamic, and exit trends are constantly evolving. While IPOs led the way in 2024, M&As are poised to play a more significant role in the future. The anticipated increase in M&A activity reflects the growing maturity of the ecosystem, as startups seek strategic partnerships and consolidation opportunities to drive growth and create value. As the market landscape shifts, startups must carefully evaluate their exit options and choose the path that best aligns with their long-term goals and stakeholder interests.
