Investors turn to M&As, secondaries for faster exits amid public market volatility

On Monday morning, the Indian stock market suffered massive losses due to mounting fears over the impact of a global trade war triggered by US President Donald Trump’s reciprocal tariffs. However, the markets pared losses later in the day after they fell by more than 5% in early trade.

Broadly, experts have noted that mergers and acquisitions will pick up in India’s startup ecosystem, especially for IPO-bound companies with weaker financials as investors seek exits. Several venture capital and private equity firms are mulling alternate routes to offset the downcycles in the public markets.

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In the most recent instance, third-party logistics firm Delhivery said last week that it would acquire smaller rival Ecom Express Ltd for a total consideration of ₹1,407 crore, marking one of the biggest consolidation moves in the sector. Delhivery, which intends to buy nearly 99.4% of shares of IPO-bound Ecom Express, expects to enhance its scale and strengthen its service quality with this purchase while also giving Ecom’s investors an exit.

Ecom’s distress sale, which happened at nearly an 80% cut in valuation from its peak, comes as the company largely depended on Meesho, which eventually began its own logistics arm. In such cases, “when a company is overly reliant on a single customer and may operate on a deep discounting model with negative margins, consolidation isn’t just an inherent risk— it’s inevitable. For Delhivery, it’s a strategic move to solidify scale in Tier 2 and 3 cities, but execution will be key,” said Angad Singh, founding member of Zippee, a quick commerce logistics startup.

Ecom’s woes

In February, Mint reported that Ecom put on hold its plans for an initial public offering of its shares and laid off at least 500 employees to trim costs months after filing its draft papers in August. While its business floundered, its investors, including British International Investment, Warburg Pincus, and Partners Group, sought an exit under the offer-for-sale option in the IPO, which they will now get through Delhivery’s acquisition.

Last month, Warburg’s managing director Vishal Mahadevia alluded to the diversification of exit options against the backdrop of multiple macroeconomic challenges and explained that investors are flocking more towards private market exits in the current vintage at the Mint India Investment Summit.

Ecom’s investors are not alone in this battle. Several investors alike are tweaking their strategies to become more ready for the new reality of what could be the start of many such transactions. VC firm Foundamental has seen more offers for M&A and secondary purchase-driven exits in recent months and has also begun planning exits for some of its portfolio companies at an earlier stage.

“While these typically haven’t come with the valuation premium that we used to see in the 2020-2022 cycle, the fact that there are market participants who are stepping in with such offers is a positive sign that well-run companies might have other options that provide a valuation backstop,” said Shubhankar Bhattacharya, co-founder & general partner at the firm. He did not disclose specific names as the conversations are still ongoing.

Increase in M&As

Other investment firms, such as Quadria Capital, QED Investors, and Prime Venture Partners, have also alluded to the broad gamut of alternatives. While Quadria’s managing partner Amit Varma said the healthcare-focused private equity firm is preparing exits for its companies early to avoid solely relying on capital markets as the only route, fintech-focused QED expects to see an increase in M&A because of a slowdown in IPOs.

“In other situations, companies can explore additional rounds of private capital, as a bridge round or pre-IPO round to get more funding,” QED’s partner Sandeep Patil said, adding that there is also likely to be an increase in private equity investments in late-stage tech companies if they have the right financials. “In such cases, venture investors may take an exit through secondaries.”

This can be seen in the case of early-stage startups like Droom, which is evaluating alternate strategies like a fresh funding round to better capitalize on future business opportunities, although it did outline plans to revive the initial public offering of its shares.

To be sure exits through public markets have started relatively slowly this year, with a bulk of them happening through secondary transactions. Several firms have launched dedicated funds to explore secondaries as an active strategy. Some examples include Kenro Capital, led by former Peak XV MD Piyush Gupta, and Oister Global and Tribe Capital’s $500 million India-focused fund, which was launched last year.

Other venture capital firms like Prime, which usually does exits through M&As and IPOs, will also consider secondary as an alternate strategy to get liquidity. With IPO candidates such as Niyo and MyGate, it is open to evaluating secondaries for interim liquidity, its co-founder and managing partner Sanjay Swamy told Mint after it launched its fifth fund in March. So far, the firm’s exits include Happay (acquired by Cred), Recko (Stripe), Perpule (Amazon), Ezetap (Razorpay), and Tracxn after its IPO.

Change in valuations, issue size

Beyond delayed timelines to go public, several companies are also facing a reassessment of their valuations and issue size as geopolitical tensions and macroeconomic challenges sent equity markets into a tailspin since the beginning of this year.

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However, not all is doom and gloom. While some companies wait a few more months for a better listing, the IPO window is still ripe for high-quality companies. Startups like Physicswallah have pursued confidential IPO filings to keep their listing timelines flexible and manage market volatility, Mint reported in February.

Others including Kissht, Turtlemint, Meesho, PhonePe and Lenskart are steadfastly working with bankers for an IPO soon, joining the growing list of other high-profile public issues such as Groww and Zepto.

For those such as Swiggy, Ola Electric and FirstCry that have already gone public and are trading below their issue price, Lightbox’s Sandeep Murthy attributed the broader concerns about IPO success to the poor performance of some of these companies. “The market is still learning to evaluate these businesses, their models, and their growth potential. All of this means there will be some mispricing for a while, but things will eventually settle,” he said.