Choppy markets take toll on pre-IPO deal talks

Wealthy individuals and institutions often snap up shares in private deals, tempted by potentially high returns in future initial public offerings (IPO). However, choppy markets have clouded many IPO plans, sparking caution at the pre-IPO stage as well. According to bankers and lawyers working on pre-IPO deals, investors who crowded such rounds earlier now want to bullet-proof their investments.

“Investors are increasingly asking for readjusted and discounted valuations, more controlling rights or stake, and negotiating on deal closing timelines to mitigate risks associated with the current market conditions,” said Vineet Shingal, a partner at Khaitan & Co., which is actively working on several pre-IPO deals.

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Some of the companies raising pre-IPO funds include Pine Labs, Porter, Groww, Zepto and Cred. Mint could not ascertain if pre-IPO deals are being renegotiated for them. Queries sent to the companies remained unanswered.

“Given the larger investment size in pre-IPO transactions, where investors have greater negotiating power, coupled with the stock market volatility, investors are trying to renegotiate terms on ongoing deals,” said Snigdhaneel Satpathy, a partner at Saraf and Partners.

Deals in the startup landscape slowed in 2023, with funding dropping to $7 billion from $25 billion the previous year, following a period of pandemic-driven funding surge. As late-stage deals reappear, investor interest leans on pre-IPO deals due to their perceived potential for clearer and quicker returns. However, market volatility and weaker tech listings have played spoilsport.

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FirstCry shares listed at a 40% premium, while Swiggy listed at a modest premium of 5%. Ola Electric listed flat but soared 20% on the day of listing. Yet, shares of these companies have shed 42-48% in 2025 so far. Meanwhile, CarTrade Tech that listed at a 1% discount is up 14% year to date.

Since its September peak, the Nifty 50 has slipped 7%. Meanwhile, the India VIX, the market’s fear gauge, has surged 52%, signalling a sharp rise in market volatility and investor unease.

“We are seeing a bit of a downside in terms of both HNI (high networth individual) and retail subscription in recently listed IPOs…,” said Neha Agarwal, managing director and head of equity capital markets at JM Financial Institutional Securities Ltd. “This could be due to factors like market volatility, slightly higher valuation, interest rates not coming down as early as expected and economic uncertainty, which have made investors more cautious.”

Consequently, several investors are repricing pre-IPO rounds or pushing for structured deals to reduce downside risk. “We are seeing more instances of renegotiation now compared to the last quarter,” Shingal of Khaitan said.

“There is certainly a wait-and-watch mode among investors. Family offices and HNI demand for pre-IPO companies, which was strong last year for companies such as Swiggy, FirstCry, Oyo has disappeared. It’s hard to judge how public markets will eventually value a company as many IPOs from last year are below IPO price,” said an India-market focused investor in tech deals for over 20 years.

According to data from Venture Intelligence, Indian startups raised $355 million across 17 pre-IPO deals in 2024, up from $235 million across six deals in 2023.

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According to an industry watcher, a startup founder recently secured commitments from 10 investors for a pre-IPO round, but only two finally signed up since the rest wanted to renegotiate terms as the market turned turbulent. Mint earlier reported that reduced IPO appetite at a time of global turmoil following US president Donald Trump’s tariff war has dried up new offerings in the market.

“More than a dozen venture-backed startups in India are currently in various stages of preparing for an IPO. Most—if not all—are choosing to defer rather than cancel their listing plans. The primary reason is compressed valuation multiples,” said Iqbal Khan, partner and national corporate lead, JSA Advocates & Solicitors. He said this had resulted in selling shareholders being more open to realistic valuations and structured deals to generate liquidity through partial or full exits.

“Companies are re-evaluating their strategies in light of current market sentiment, leading to slight changes in plans that impact deal timelines and terms,” said Amit Ramchandani, chief executive officer and head of investment banking at Motilal Oswal Financial Services.