Impact of COVID19 on Indian Startups to defer IPO Plans

The global financial crisis has occurred with the onset of coronavirus pandemic. Most of the companies are now being forced by the COVID19 pandemic to delay their business expansion plans for this year 2020. The huge impact of COVID19 on Indian Startups and Economy that startups that planned to launch their IPOs in 2020 have now started deferring their IPO plans. And do you know what is wrong with it? This is not really normal, and the present COVID19 situation can cause more devastating effects on businesses, especially startup companies.

The deferment in the IPO plans due to the coronavirus pandemic has also led the investors in holding their capital and closing one of the lucrative ways of gaining finances in terms of long term investments. Investors also know that investing their finances right now can be less rewarding in this year, as the primary market situation is not good. This condition is not only faced by companies and investors in India but across the whole world. Assessing the present pandemic situation and predicting anything for this year is not possible as no one knows that for how much time the coronavirus will influence our economy. Therefore, one task which the new startup companies are doing is that they are deferring the IPO plans, so it does not negatively affect more to the companies as well as the investors.

Indian Markets at Historical Lows 

The coronavirus pandemic is not only affecting the startup companies, but it is giving a devastating experience to all sectors, industries, and companies, be it an established one or a startup. The Indian primary market is one of the emerging markets in the world, but due to the COVID19 effect, it is also facing a situation of historical lows. The situation has now led the condition of struggle and tough time for the startups, which are in late or seed funding stages. Most of the companies are now working on plan B, which means conserving their cash and cutting down the expenses.

“Companies such as PolicyBazaar and Ola had planned to launch their IPOs and go public in 9 to 12 months, but taking the coronavirus pandemic situation into consideration, they have started deferring these public issue plans.”

Vedant Goel, Director of IPO Corner

The Indian stock market is also facing a downfall of at least 26% since February 2020, and those companies which have already launched IPO this year and got listed in the stock exchange have only raised $7 million approx., which is a five-year low figure. Some of the startup companies such as Shop101, BigBasket, Bank Bazaar, and Capital Float have started raising bridge funding rounds from the existing investors as there is no positive confirmation of raising funds through public issues.

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A Great Negative Impact 

The present situation can be considered as funding market dislocation, and it will be pervading. For example, during the period of dotcom crash (which happened in the year 2020), the funding market dislocation was in continuation for multiple years. Most of the financial industry experts have warned that the coronavirus outbreak may continue to affect the economy and businesses for several quarters, and it can take a much longer time for the global economy to recover to its original position. This negative impact of coronavirus is the worst crisis for a startup company, which has no other way to overcome apart from waiting for a normal situation to come back.

Experts from www.ipocorner.in also say, “Those startups which are not making profits right now should depend on their existing funds to survive the next quarter. But they should ensure that they have enough funds and liquidity.”

Here we have Mainboard IPO List from IPO Corner

Just like the other companies, startup companies are also facing a very tough time of struggle to cope up with the negative impact of the coronavirus pandemic situation. Be it the condition of fundraising or handling the customers or employees and managing the suppliers, these startup companies are scrambling for saving their company from collapsing as an effect of the COVID19 outbreak. Most of the startups are working on job cuts and suspension of operations in several cities or states of India, to survive this tough time. If the coronavirus continues to spread at this pace, maybe India can see many startups to close their businesses. How can a company launch its IPO in this condition? There are no positive hopes for an IPO to be launched in the coming time of this year 2020.

Conclusion 

The coronavirus impact is not a short term impact on any country’s economy. For Indian economy and startup businesses, this pandemic situation is leaving a long term impact, though all sectors and businesses under these sectors are struggling hard to deal with the present effects and after-effects of the pandemic condition. Startups which launched recently to provide the services of hotel and flight bookings have been hit very badly as they have seen the highest drop in demand, which was ever seen in history. These sectors are likely to see more falls in the coming months.

There is also some good news for some startups, which are making good profits in this pandemic situation. These startups are those videoconferencing firms, gaming or streaming companies or online education content providers, whose services are now in great demand at the present time. They have seen a significant rise in their users, business, and sales, but still launching an IPO this time is not worth them because investors are now holding their finances to invest in a normal and positive scenario.