India’s listed digital firms’ market in early days as ‘reverse flipping’ gains steam: Bay Capital

While India’s publicly listed digital-first companies are now valued at over $90 billion, the market remains concentrated and still in the early stages of maturity, according to a new white paper by Bay Capital.

The firm noted that nearly a quarter of this total market value is accounted for by a single company, though it did not name Zomato.

However, Bay Capital noted that this concentration is not a concern but rather a signal that the market is just beginning to deepen.

“With more businesses reaching profitability and scale, the overall value of India’s digital sector is expected to rise steadily,” the report said. “What was once seen as risky or speculative is now increasingly recognised as a credible, long-term investment opportunity — grounded in real business models and good governance,” it said.

A key trend identified in the report is the growing number of startups “reverse flipping” by shifting their legal domicile back to India from jurisdictions like the US and Singapore and preparing for domestic initial public offerings (IPOs).

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Companies expected to complete this process in 2024-25 include Meesho, KreditBee, InMobi, Udaan, and Pine Labs. PhonePe, Groww, and Zepto have moved to India and are eyeing listings. Razorpay is the latest to complete the reverse flipping process.

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“Indian companies, or rather India-based businesses, have made their registered offices in other countries like Singapore or the US because they always thought that raising capital is easier for companies domiciled in those countries,” Nikunj Doshi, managing partner at Bay Capital Investments Advisors, told ET. “But now capital is easily available in India, and better valuations make them think it is better to get the company registered in India and get IPO-ed here.”Bay Capital also attributes this trend to regulatory changes, such as the Securities and Exchange Board of India’s (Sebi) framework allowing loss-making but high-growth firms to list on stock exchanges as well as the growing depth of India’s domestic capital pool.

It noted that over $40-50 billion has been returned to investors through tech-related exits over the past two years, creating liquidity for reinvestment into newer sectors like software-as-a-service (SaaS), spacetech, climate tech, and deeptech.

Bay Capital, an investor in firms like Delhivery, Policybazaar, and Info Edge, said India’s public markets are now structurally better equipped to support digital-first businesses. However, it cautioned against hype-driven investing.

“Just calling a business “digital-first” or “AI-powered” isn’t enough,” the report said. “What matters is acquiring and retaining paying customers, delivering value, keeping unit economics sound, executing well, and following strong governance.”

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