Indian Startups Lower Valuations Before IPOs

Two prominent Indian startups, Ola Electric and FirstCry, are preparing to launch their public listings this month, but both companies have opted to price their shares below previous valuations in response to shifting market conditions. Ola Electric's shares are now valued at approximately $4 billion, reflecting a 26% decrease from its $5.4 billion valuation during a funding round in October 2023. Similarly, FirstCry, the leading e-commerce platform for mother and baby products, aims to raise up to $501 million at a valuation of $2.9 billion, significantly lower than its initial IPO target of $6.5 billion to $8 billion. Industry experts suggest that founders and boards are increasingly recognizing the need for downside protection and are willing to leave some value on the table during IPOs. Swapnil Sheth, a director at investment bank IndigoEdge, emphasized that setting the right pricing is crucial for attracting anchor investors and ensuring robust retail subscription to the IPO. Ola Electric has already secured $319.5 million, or about 45% of its IPO offering, from notable anchor investors, including HDFC and SBI mutual funds. Both companies follow the path of insurance startup Go Digit, which also reduced its valuation by 25% prior to its listing in May. Despite this, Go Digit's market cap has since risen to $3.8 billion. Looking ahead, major players like Hyundai and Swiggy are planning to raise around $5 billion in 2024, indicating ongoing investor interest in the Indian startup ecosystem. Sheth further noted that an IPO should not be viewed merely as an exit event for founders, but rather as the beginning of a new phase that demands a larger vision and sustained growth, as public market investors will closely monitor performance and profitability.