IPOs And Beyond: Navigating Path To The Public Markets

Navneet Singh Sep 30, 2024

As companies like Ixigo and Zomato navigate the challenges of the post-pandemic world, experts discuss the critical balance between profitability and ambition in a evolving initial public offering landscape

In the complex landscape of India’s startup ecosystem, the decision to go public has emerged as a critical decision for many companies. As Zomato navigated the pandemic's financial fallout, the focus shifted to profitability, investor trust and changing perceptions of public markets.

Amidst pressures to deliver immediate results, founders are tasked with fostering long-term vision and operational excellence. With growing hope for initial public offering (IPO) activity, the future signals a redefined approach to public offerings, celebrating innovative business models as key to sustainable growth. Experts highlighted a crucial moment for startups, balancing ambition and accountability in a rapidly evolving business landscape.

The IPO Decision: A Necessity Or A Strategic Move?
Experts discussed Zomato’s IPO decision, prompted by the financial strain of the Covid-19 pandemic and opined that fundraising from private markets had become virtually impossible, leading the Zomato team to consider going public as a desperate contingency plan.

Akshant Goyal, Chief Financial Officer (CFO), Zomato explained, “We realised we had no option but to explore public markets for funding.” Surprisingly, as Zomato prepared for its IPO, market sentiments shifted positively, allowing the company to raise substantial capital from private investors before going public.

While emphasising the importance of profitability before considering an IPO, Aloke Vajpayee, Managing Director and Group Chief Executive Officer, Ixigo said, “We took a hard look at our business model and focused on becoming profitable,” he said, recalling how the travel industry was hit hard by the pandemic. He added, “When Covid struck, we chose to invest in our team and infrastructure rather than lay off employees, which ultimately paid off.”

Confidence In Business Models
Experts acknowledged that while raising capital is important, building trust in the business model and ensuring stability is paramount, particularly in regulated sectors. Alok Bansal, Co-founder, PB Fintech (PaisaBazaar), emphasised the unique perspective of founders when contemplating an IPO. “For founders, this is about survival and making their vision a reality. We need confidence in our business model’s longevity,” he stated.

Talking about trust and stability In public markets, experts highlighted the inherent pressures of being a publicly listed company. PaisaBazaar's Bansal stated, “For founders, going public represents a 0-1 scenario; there’s no room for error.” However, they noted that being a listed entity provides stability and trust among investors, which is crucial for long-term growth.

They showcased the evolving landscape of India’s startup ecosystem. Experts pointed out that while the enthusiasm in private markets has waned, public markets are increasingly recognizing the value in new-age business models. “The confidence has returned as larger companies have demonstrated profitability, paving the way for smaller players to follow suit,” said Kunur Bavishi, Senoir Vice President IIFL Securities.

Post-IPO Life: A New Reality
Panelists reflected on the pressures of meeting shareholder expectations. Goyal mentioned that Zomato’s transition required a focus on transparency and communication with investors about profitability and growth trajectories. “We had to adapt our strategy to ensure that we met the market’s expectations while staying true to our business goals,” he explained.

Experts emphasised the need for companies to invest in long-term growth, even when faced with immediate pressure from stock performance. They said that investors need to understand that significant investments today can yield long-term benefits, advocating for a focus on customer experience and operational excellence.

The Future Of IPOs
With the conversation concluding, panellists expressed optimism about the future of IPOs in India. Bavishi predicted an uptick in IPO activity, suggesting that 2024 could see a larger influx of public offerings as companies adapt to market conditions. “We are likely to witness more companies stepping into the public domain as the landscape becomes more favourable,” he said.

The panel discussion highlighted the challenges startups face when moving from private to public markets. As founders juggle growth ambitions and profitability demands, the insights from industry leaders throw light on the path forward for emerging companies in India’s changing business environment.