What Startups That Have Postponed IPO Plans Should Focus On Conservation of cash and a strong focus on governance will be key going forward, say experts

Many startups including MobiKwik, boAt, Oyo Hotels and Homes, Snapdeal, Droom, Pine Labs, PharmEasy and others have put their IPO plans on the backburner. The reasons are many including negative sentiments towards startups going for IPO, recession, global stock market meltdown and geopolitical turmoils. Under this situation, what should one focus on at present? We asked some experts.

"Startup founders who are looking at potential IPO should focus on the most important metric of their business – a clear path to profitability - and cut down on unwanted cash burn hurting the P&L. Most importantly, if you have stayed private as a startup company, and would want to turn into a public company, it's very important to have the right structure, strong internal and external governance board and follow all the necessary compliance from the regulators. ," said Mohamad Faraz, founding partner, Upsparks.

Building a sustainable business is key and thus startups should look into their books and work towards positive numbers. "Strong Operational Cashflows are a crucial ingredient for any IPO plans in the near future. Growth is no longer the only metric that investors are looking at, leading many to rethink and recalibrate their business models," said Siddarth Pai, founding partner, CFO, ESG Officer, 3one4 Capital.

Conservation of cash and a strong focus on governance is key for organizations that have plans for an IPO. "A solid IPO team that manages the readiness and execution of the IPO is critical for success backed by a sound board of directors. Keep the communication channels active between the investors, founders and the board to discuss details on your readiness and understanding of your indeX," said Amarjeet Singh, partner and national Lead, emerging giants and startups, KPMG India. Singh advises startups to plan for the right time to launch the IPO based on market conditions, sentiments of investors and the market drivers at large.

IPOs back anytime soon?

"We should be seeing the IPO for leading unicorns and startups to launch from Diwali 2022 up until 2023. The founders are in a wait-and-watch mode currently to assess the market dynamics and plan the launch date with the utmost caution," said Singh.

Experts watching the markets and global and domestic scenarios closely are positive that the second half of 2023 is when the startups who have postponed IPO plans will take the leap of faith. "Second half of 2023 is when inflation should become manageable and the supply chain shocks that have exacerbated inflation are expected to become manageable, will be ideal. The bigger issue then would be the US elections in 2024, which does have an effect on how the US will continue to tackle this issue," said Pai.

Will Budget 23 offer the right push?

If the budget focuses on issues highlighted by startups and tech companies and the representative bodies, it is expected to help companies prepare better for the future. "The government should come up with more policies benefitting the startup ecosystem. There have been discussions on various subjects, but it is time now to push the pedal and work towards ease of starting up and ease of doing business. The recessionary fears too would be away from us hopefully by then and spending momentum would also pick up," said Faraz.

While we see conditions improving as we go forward, the budget has a tall task of ensuring macroeconomic stability. "This is along with dealing with issues of growth and rising inflation eating into savings. The issues faced by Indian startups specifically exist outside this macro-economic situation. Solving for those will help boost entrepreneurship and new asset creation, which is crucial to Indian startups scaling," said Pai.