IPO-bound companies get market-ready shopping for top executives

Bengaluru: Grabbing the imagination of the retail investor is not an easy task. Companies are fast realising that they need to be ‘suited and booted’ right to make the cut. Towards this endeavour most of them are seen going on hiring spree, almost reconstructing their leadership team, in the run-up to their initial public offering (IPO). With the surge in IPOs in 2024, this trend has only gathered such momentum, that even the current volatile markets have not dampened the fervour, say industry observers.

“In the last 12 months, we have seen at least a 30 per cent rise in these kinds of roles being hired through us, compared to the year before,” said Ankit Agarwala, Managing Director, PageGroup India.

In fact, pre-IPO onboarding took off in a big way in later 2023 and early 2024. Those hitting the markets this year have already completed their hirings a while ago and those slated to go public in 2026 are the ones recruiting now, explained Ashish Sanganeria, Senior Partner at Transearch India.

New needs

Beyond making a good first impression, the rationale behind this exercise, analysts point out, are actual needs of running a public company, which are very different from that of a private one. For one, managing a few investors as a chief financial officer (CFO), versus everything being under an unforgiving public scrutiny, requires an upgraded leadership. Public companies require greater financial prudence, strong investor relations, government affairs expertise, compliance officers, legal counsel, they highlighted. Companies are seen addressing these requirements in the 12-18 months preceding the IPO. But this is not for hiring across the board.

“There is a market expectation of having the kind of management team that investors are typically used to interacting with during an IPO. For most startups, their founders are visionaries - but not all of them may be excellent business managers, especially as these companies become much larger than when they began. While it is not limited to new age companies, it gets more pronounced there,” pointed out Yatin Singh, CEO - Investment Banking at Emkay Global Financial Services Ltd.

About 35 per cent of companies that went for an IPO in FY25 hired for a CXO (chief experience officer) role within 6 months prior to launching their IPO, according to data from CIEL Works, while 19 per cent of companies hired for this role within 3 months prior to launching their IPO.

When Paytm went for an IPO, we facilitated around 9 CXOs for that. PhonePe in the last 1-1.5 years has onboarded 5-6 board members, listed Sanganeria.

“We recruited well-qualified people in preparation for our own IPO,” said Aditya Mishra, MD and CEO of CIEL HR Services Limited. He gave examples such as a CFO, a full-time company secretary, law officer, several qualified chartered accountants, and other specific expertise that the company hired.

A fairly common role is CFO, wherein companies try to upgrade or get somebody who has gone through IPOs in other organisations previously. “There is an established pattern of attrition out of the investment banking industry into corporate India for specific roles which are more strategy, fundraising, and listing-related,” highlighted Singh.

The brag factor

The team running the organisation clearly becomes a focal point for investors.

“You want to show certain skills that you have. If you are a digital-first company, you want to tell large investors that your CTO (chief technology officer) has worked with industry leaders in the past to basically be able to establish the fact that your critical roles have the best pedigree possible that anybody can have. This will vary by industry, of course. An auto company going for an IPO would want to say that their EV CTO has come from one of the best auto companies with strong EV skills - the jobs that give you legitimacy,” explained Anandorup Ghose, Partner at Deloitte India.

Compliance aspect

Another factor driving the surge is tightening compliance standards.

“A lot of the roles we hire for are related to governance and compliance. There are compliance positions, and that for ESG, government and regulatory affairs, audit, legal counsels. These are functions which many of these companies don’t have before the IPO journey,” described Agarwala.

This can be more prominent for certain industries. For tech companies, roles such as information security and data management become important. In insurance and banking, compliance roles have become more valuable since the regulations that have come in, explained experts.

“For companies that are in more regulated sectors, the pay premiums for compliance kinds of functions have gone up,” added Ghose.

Post-IPO

FILE PHOTO: A bird flies past a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai February 1 2023.

A good percentage of the new roles hired continue to stay on in the company post-IPO, taking on more responsibility to be answerable to the market, as per analysts.

At the same time, companies try to trim their workforce to prove efficiency well before going for an IPO.

Companies want to show the investor that they have the best talent in the market to deliver their promises. They need to be able to show higher productivity levels, more lean staffing. So companies may reduce head counts at one end, even as they hire on the other end for specific skill sets, explained Ghose.