Investors Need to Look at Exit Options Beyond IPO in India, Say Limited Partners
IPO : In the fast-growing Indian startup ecosystem, initial public offerings (IPOs) have long been the preferred exit route for investors looking to cash out on their investments. However, industry experts and limited partners (LPs) are now emphasizing the need for diversified exit strategies beyond IPOs. This discussion took center stage at the IVCA Conclave 2025 in Mumbai, where seasoned investors expressed concerns over market volatility, foreign institutional investor (FII) sell-offs, and high valuations.
IPOs Are Not the Only Exit Strategy
India’s stock markets have been a hotbed for startup listings, with companies such as Ather Energy, BoAt, CarDekho, Zepto, and Bluestone gearing up for their IPOs in 2025. While this presents an exciting opportunity, market experts warn that over-reliance on IPOs as an exit strategy can be risky.
Kunal Sood, Managing Director of Pantheon and Chair of the IVCA LP Council, highlighted the growing concerns surrounding foreign investor sell-offs. “In the first 40 days of the year, about $10 billion of capital has left India, leading to stock market corrections. The playbook that worked in a favorable market may need adjustments as conditions change,” he noted.
High Valuations and Exit Challenges
Despite India being an attractive market for investments, concerns around high valuations persist. Neha Grover, Regional Lead, South Asia Funds Group at IFC, pointed out that India’s valuation levels are significantly higher compared to other emerging markets.
“If you look at valuations, they are high. But even with these elevated levels, investors have managed to generate returns, as seen in the recent exits over the last few years,” Grover stated. She emphasized that risk-adjusted returns remain strong in India, but investors should be mindful of limited exit opportunities.
Over the past five to six years, India has witnessed approximately $130 billion in exits, accounting for nearly two-thirds of the total exits in the last 15 years. However, a significant portion of these exits has been through the public markets, making it crucial to explore other options.
The Role of Private Equity and Venture Capital Exits
Amit Sachdeva, Managing Director at AlpInvest Partners, shed light on the growing importance of private equity (PE) and venture capital (VC) exits. In the first half of 2024, nearly 60% of PE/VC exits were through IPOs, underscoring the need for alternative strategies.
Sachdeva remains optimistic about India’s investment landscape. “The exit environment is becoming more robust, foreign exchange is stabilizing, and buyouts are gaining traction. The overall attractiveness of the PE/VC industry is stronger than before,” he remarked.
A Look at India’s PE/VC Market Growth
The EY IVCA report on India’s PE/VC outlook for 2025 offers promising insights. Despite global economic challenges, 2024 marked the second-highest investment year ever, with $56 billion in funding. This growth was fueled by a record-breaking 1,352 deals, representing a 54% year-on-year surge.
With robust investment inflows and a growing number of startups, investors must diversify their exit strategies to maximize returns and mitigate risks.
Alternative Exit Strategies Beyond IPOs
While IPOs provide liquidity and visibility, alternative exit routes can offer more stability and flexibility. Some key alternatives include:
- Secondary Sales: Investors can sell their stake to other PE/VC firms or strategic buyers. This method allows for liquidity without the unpredictability of public markets.
- Mergers & Acquisitions (M&A): Large corporations often acquire startups for strategic expansion, offering an attractive exit route.
- Buybacks: Founders or existing investors can repurchase shares, providing an opportunity for early investors to exit.
- Revenue-Based Financing: Startups with strong cash flows can repay investors based on revenue, ensuring steady returns.
Key Financial Ratios of the Indian Startup Ecosystem
| Financial Metric | 2024 Value | Change from 2023 |
|---|---|---|
| Total PE/VC Investments | $56 Billion | +15% |
| Number of Deals | 1,352 | +54% |
| FII Outflow (First 40 Days) | $10 Billion | -12% |
| PE/VC Exits via IPOs | 60% of Total | +10% |
| Total Startup Exits (Last 5 Years) | $130 Billion | +25% |
Conclusion: Diversification is Key
The Indian investment landscape is evolving rapidly, and while IPOs remain a viable exit strategy, they should not be the only option. Investors must adapt to market changes, explore alternative exit routes, and make risk-adjusted decisions. With India’s booming startup ecosystem and robust PE/VC growth, the future remains promising—provided investors make smart, diversified choices.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.