On your marks: Fintech soonicorns fast-track IPO plans, preparing for market jitters to end

Strike while the iron is hot – that seems to the mantra of a cohort of mid-stage fintech startups that is getting IPO-ready in a jittery stock market, hoping to seize the moment when a favourable window opens up.

Fintech startups—especially those valued at under $1 billion and often referred to as soonicorns—Turtlemint, KreditBee and Kissht, are preparing for public listings, undeterred by market volatility or the lacklustre performance of some previous tech company listings, Mint has learnt.

Leading fintech stocks have declined sharply over the past month amid a broader slowdown in the market. While PBFintech opened 7.7% lower on 15 April than its high of ₹1,698 on 24 March, MobiKwik opened 21.2% lower than its high of ₹354.40 on 19 March.

Northern Arc Capital, a lending-focused NBFC, listed at about ₹351 per share in September and traded at ₹190.65 as of 11 April. On the other hand, the Indian stock market has been declining over the past few months, with the Nifty 50 dropping by about 16 per cent since September 2024.

While the broader sentiment remains cautious, returning sectoral growth after regulatory crackdown, slow private funding, and in some cases, investor pressure for exits, are driving these planned listings, experts told Mint.

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“More fintech companies with sub-$1 billion valuations are exploring IPOs, largely driven by great valuations received for IPOs in the last couple of years in India, along with the option for retaining a controlling stake, which is unlikely if the investors exit through a sale to a strategic investor,” said Shoubhik Dasgupta, fintech specialist and partner at Pioneer Legal.

According to data from Tracxn, almost half of about 27 fintech startups with valuations ranging from $300 million to $1 billion, have not raised a private funding round in the past 18 months.

Rush to list

Private equity and venture capital funds nearing the end of their cycles are also nudging portfolio firms toward IPOs to unlock liquidity. At the same time, regulatory headwinds that clouded the sector in 2024 have eased to some extent especially as fintech companies corrected their courses, reworked their business models and focused on compliance.

Insurtech startup Turtlemint, currently valued at about $900 million, is in talks with Motilal Oswal, ICICI Securities, JM Financial and Jefferies to help manage a public market listing scheduled later this year, Mint reported on Wednesday.

Kissht, an online lending platform valued at $317 million, is preparing to tap the capital markets with a $225 million initial public offering in October. The company has roped in ICICI Securities, UBS Securities India and Motilal Oswal Investment Banking, and is in talks to finalise a fourth banker, Mint reported earlier this month.

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Advent International-backed lending startup KreditBee, last valued at about $700 million, is merging its two Indian entities ahead of a local listing planned for next year, Mint reported on Thursday.

Lending tech startup Aye Finance, last valued at about $400 million, received regulatory approval last week for its IPO.

Larger unlisted companies such as Razorpay and PhonePe have also started preparations for a listing in the near future, according to reports. While both have shifted their domicile to India, PhonePe is likely to list this fiscal, while Razorpay’s IPO is expected in the next few years.

Groww has hired investment bankers for its  IPO, according to media reports.

With many such companies now eyeing growth through new market entries, diversification, and mergers and acquisitions, others in the sector are being prompted to gear up and return to the fundraising trail.

“For some, it is also an attempt to show continued activity in the market as competitors focus on growth and visibility,” said an investment banker, requesting anonymity.

Risky timing?

Experts said most fintechs gearing up for IPOs – a majority of which are lending focused – are now profitable, which helps position them more favourably with retail and institutional investors. Aye Finance, KreditBee and Kissht were profitable as of FY24, according to their statutory filings.

Despite the optimism, the question that remains is how the markets will price new-age tech lending companies, which are a new cohort for the bourses.

“The good news is that most of these lending companies are profitable. But the key question now is how much of their lending is secured versus unsecured. Unsecured loans carry more risk—default rates tend to be higher, and when the credit cycle turns, losses can be significant. It is still to be seen how the market prices these new-age lending companies,” said Piyush Gupta, founder and managing partner of Kenro Capital, a late-stage secondary focused fund.

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Still, soonicorns are betting on multiple factors. Getting approval from the Securities and Exchange Board of India allows companies to stay IPO-ready for 12 months, giving them the flexibility to time their offer.

"Hiring bankers is just the beginning. Good IPO prep alone takes 6-9 months, followed by 6-9 months to file the DRHP (draft red herring prospectus) and receive SEBI approval. You want to be ready with your paperwork so that when the markets turn favourable, you can launch without delay,” said Kenro’s Gupta. “If Q4 turns out to be a good quarter and you start the process then, it’s already too late.”

Private funding, too

In addition, most of these companies are taking a dual funding approach.

Mint reported that Kissht and Kreditbee are planning pre-IPO private funding rounds. Navi Technologies, a fintech firm currently valued at a little over $500 million, is eyeing a public listing this year and is trying to raise $200-300 million at a $2 billion valuation, according to media reports.

“For later-stage investments, a clear visibility on a path to an IPO may tip the scales in the favour of investment in such a company,” said Dasgupta.

This could help them to raise private funding if there is a delay in listing. 

A successful run of IPOs by mid-stage fintechs could signal a revival in investor confidence for the broader sector. These companies, however, still face the challenge of a weak overall market that can dampen investor sentiment.

“Investor sentiment has been bullish for a while now, especially throughout last year, but that is changing quickly, given the volatility and uncertainty around the global economy,” Dasgupta added. “If the company and its advisors expect unfavourable valuations due to weak investor sentiment, it would be logical for them to delay their IPOs and in certain cases, delay it indefinitely.”