PhonePe Slams The Brakes On The IPO Cavalcade

Since the beginning of the year, India has been  gearing up for one of its busiest years in the public markets. Dozens of high-profile startups were preparing to tap public investors, and the IPO pipeline looked packed. But over the past few weeks, that momentum has cooled noticeably, with several companies choosing to delay their plans.

Fintech giant PhonePe became the most visible example last week when it officially announced a temporary pause to its IPO plans. The company said the decision was driven entirely by volatility in global equity markets and that it intends to revive the process once global conditions stabilise.

This slowdown comes even as several other large-scale startup listings are lined up for the next year and a half. Quick-commerce firm Zepto quietly filed for a $1.22 Bn IPO in December, making it one of the most anticipated listings of 2026. 

Around the same time, OYO’s parent PRISM submitted pre-filed draft papers, shortly after shareholders approved its third attempt at going public. Meanwhile, Flipkart has now completed its full redomiciling to India after receiving government approval, with the NCLT clearing its reverse flip late last year, a key precursor to its eventual India listing.

All this was building toward what was expected to be a blockbuster 18 months for India’s public markets. More than 48 startups across fintech, ecommerce, enterprise tech, consumer internet, logistics, foodtech, advanced hardware and even deeptech were preparing to go public. The 2026 IPO class was widely expected to surpass the 18 listings seen in 2025.

However, the geopolitical tensions in West Asia have shifted the mood dramatically. PhonePe’s postponement now appears to be just the first visible sign of a broader rethink. Market analysts say investors have become noticeably cautious. Their hesitation has little to do with valuations or pricing and everything to do with uncertainty. Investors want to first understand how serious the geopolitical situation becomes, how long it might last and what kind of long-term damage it could inflict on the global economy and financial markets.

Because of this rising uncertainty, liquidity has gradually started moving out of the primary market and the market where new shares such as IPOs and QIPs are issued. With less money available, demand for new listings naturally softens. And once demand falls, companies simply cannot secure the kind of premium valuations that initially made going public so attractive.

The IPO Market’s Moment Of Truth

This situation has again triggered a fundamental question: Is this just a geopolitical overhang or the beginning of a deeper valuation correction? Analysts say the answer sits somewhere between temporary panic and long-overdue realism.

India’s markets have shed more than 12% since January, with the sharpest decline occurring after the escalation of the Iran conflict, which pushed global investors into risk-off mode and raised fears of energy-led inflation. For a market that has been trading at valuation premiums significantly above long-term averages, this shock has quickly exposed fragilities.

“The knee-jerk sell-off is geopolitical, but the reason it hurts so much is because valuations had already run ahead of fundamentals, especially in tech and consumer internet,” a wealth manager at a mutual fund said. He added that India wasn’t priced for volatility: multiples across digital businesses had expanded based on aggressive growth projections.

For IPO aspirants like PhonePe, Zepto and Flipkart, this means the public market is no longer willing to accept Silicon Valley–style forward-looking valuations if global uncertainty persists. The result is a growing mismatch between what founders expect and what the market is willing to pay.

However, according to some analysts, disruption is temporary. Historically, when India has seen sharp corrections due to global events, such as the Russia-Ukraine war , primary market activity has paused but not disappeared. Once volatility stabilises, the pipeline usually resumes, often with better quality filtering.

But this time, sentiment is more complicated. India’s valuation differential versus emerging markets widened sharply over 2023–24, attracting scrutiny from global funds. With FIIs selling over $8 Bn worth of equities this month alone, the market is recalibrating.

As per a few investment bankers who were working on tech IPOs, several IPO-bound companies have been advised to cut valuation expectations by 20–30%.

The fundamental question, then, is whether India returns to its premium valuations once geopolitical tensions ease  or whether the market is undergoing a structural normalisation where only profitable, cash-flow-positive companies will get meaningful demand.

If the latter proves true, India could witness the most significant reshaping of its IPO landscape since 2021, when the boom in tech listings met a harsh reality check. 

Temporary Liquidity Stress Or A New Normal For IPO Ambitions?

Foreign investor behaviour has long dictated the rhythm of India’s equity markets, and the ongoing sell-off. More than $9 Bn  in outflows this month, is raising fears that the IPO market may be heading into a liquidity drought. For high-growth, cash-burning tech and consumer companies that rely heavily on foreign participation, the stakes are especially high.

The Indian IPO market may be domestically driven in terms of sentiment, but when it comes to price discovery for large tech IPOs, FIIs are still the kingmakers. Foreign funds typically anchor the largest blocks in pre-IPO and anchor allocations, setting the tone for broader market subscription.

With geopolitical tensions rattling global risk appetite, FIIs have rotated aggressively out of emerging markets and into safe assets. This has left India’s most anticipated IPOs exposed to a sudden vacuum in pricing confidence.

“These companies need depth of capital more than just participation. Without FIIs underwriting large chunks, it becomes difficult for them to justify unicorn-level multiples,” the banker quoted above said.

However, according to Aakash Agrawal, associate director, Anand Rathi Investment Banking, this is more of a risk-off phase than a structural reset. “The Middle East conflict and resulting FII outflows have tightened liquidity and made investors more selective, particularly in high-growth tech and consumer names that are benchmarked to global capital. That said, domestic institutional depth is far stronger today, and quality companies with clear profitability pathways continue to see appetite,” he added.

Even if marquee names like PhonePe, Flipkart, or Zepto list at moderate multiples, it’s less about a demand issue and more about a recalibration of valuations. The industry may see some calibration in pricing, issue sizes, or timing, but the broader IPO pipeline remains intact, arguably becoming more resilient and fundamentally driven in the process, Agrawal added.

On the other hand, founders might return to private markets for structured funding or smaller internal rounds to “buy time” until markets stabilise.

“Tech founders are realising that without foreign capital to set benchmarks, an IPO could become a value-destructive exercise rather than a milestone,” said an investment banker advising multiple unicorns.

The vulnerability is particularly acute for companies still burning cash or relying on GMV-led business models. Public markets have become impatient with growth stories lacking clear profitability timelines.

However, analysts emphasise that the long-term India story remains intact. Once volatility settles, foreign inflows typically return quickly, sometimes faster than domestic capital. The challenge lies in surviving the interim.

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[Edited by Nikhil Subramaniam]

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