Tensions in West Asia Weigh on Startup IPO Plans, Late-Stage Firms Bracing for Reduced Valuations

Market Update: West Asia Tensions Weigh on Indian IPOs and Private Markets

Key Figures:

• $9 billion: Total investments by Middle East-based Sovereign Wealth Funds (SWFs) in Indian companies over the last five years
• 8 percent: Share of total investments by Middle East-based SWFs in Indian companies
• $112 billion: Total funding secured by the Indian industry
• 30 deals: Number of investments by Middle East-based SWFs in Indian companies
• 20: Number of new-age companies lining up to tap public markets this year

Market Sentiment

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Escalating tensions in West Asia are expected to dampen investor sentiment, particularly toward IPO-bound startups, with late-stage companies also likely to face valuation cuts in private markets. Investors around the world are growing cautious as Middle East-based funds and Sovereign Wealth Funds (SWFs) are likely to conserve capital for regional priorities before deploying into other geographies and companies.

Impact on IPOs

Investors are advising IPO-bound clients to hold off on IPO work until there is more clarity on the war front. At least 20 new-age companies, including PhonePe and Zepto, are lining up to tap public markets this year, but some may even get deferred in case markets don't turn favorable.

Impact on Publicly Listed Companies

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Several new-age companies that went public in the recent 6-8 months are awaiting large block deals, but those plans may now need recalibrations. Investors were anticipating a $15-20 billion kind of supply through block deals, but that supply will not come because there won't be any buyers.

Impact on Private Markets

Investor sentiment is just as cautious in private markets as it is for public-listed companies. New investments, especially from SWFs and the Middle East, are being paused. Late-stage companies, which have to raise capital, will see their valuations reduce.

Recommendations

Investors are advising portfolio companies to close rounds ASAP, reduce cash burn, and increase cash runway by a year as everything should be done to avoid punitive dilution in public markets.