IPO Rush: Why are so many startups going public in 2021?

So far 2021 has been an unprecedented year for the startup ecosystem as most of them are looking to get listed. Food delivery platform Zomato is one of the major startups that has been listed. Despite the dangerous second wave of the COVID-19 pandemic, this year has been remarkably good for startups. 

Besides Zomato, other startups that are waiting in line to be listed this year are Delhivery, Paytm and Nykaa.

In a tweet on July 8, the CEO of Niti Aayog, Amitabh Kant, CEO of Niti Aayog had tweeted, “ Delighted that Indian Startups- Paytm, Zomato, Nykaa and Delhivery will be listing in the Indian stock markets & raising growth capital through IPOs. This demonstrates the vibrancy & dynamism of our Startup movement & the maturity of our capital markets.”

Now a big question that tickles our mind is why are so many startups looking to go public this year. It looks like almost the entire startup system decided that come what may, they will go public in 2021.

This IPO bug has made almost everyone crazy. Picture this, around 20 companies have filed their prospectus between April and May in 2021. These companies are from diverse backgrounds which include airline companies, quick service restaurants, life science companies, small finance banks, asset management companies, and so on.

One of the reasons for the startups to go for IPO is that there is a lot of money floating around in the system as the central banks have been pumping new money into circulation in order to minimise the dastardly effects of the COVID-19 pandemic on the economy.

This kind of money first makes its entry into the banking system and then finds its way into financial markets — mostly stocks.  This basically means that there's a lot of money available in the market and investors have the muscle power of money to make investments in startups. 

Another reason is that the stock market is up and even if a company is a loss-making entity, this bull run can further push investors to bring in new money. If this continues, then startups may ask for a bigger valuation than the expectation.

Besides that, internet startups like Zomato and others have gained a lot amid the pandemic. They saw an uptick in the numbers and their businesses flourished after the subsequent lockdown after the pandemic.

Ever since the pandemic happened, many startups went ahead to acquire new customers, bolster their financials and add a bit of stability on top. Given the fact they were looking to go public, they would have definitely done it but pandemic accelerated the process. 

Meanwhile, SEBI has eased the process of listing startups in India. This also comes as a helping hand for those who are looking to raise IPOs this year.