 Morning Dispatch |
Esop tax relief may widen; New-age startup IPO pipeline swells
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Happy Tuesday! The government is mulling extension of the tax deferral on Esops to all startups. This and more in today’s ETtech Morning Dispatch.
Also in the letter:
■ IT’s Q3 preview
■ Even Healthcare raises funds
■ Cars24’s new acquisition
The Centre is considering widening the four-year Esop tax deferral to cover all DPIIT-recognised startups, significantly expanding a benefit that currently applies to around 4,000 firms approved by an inter-ministerial board.
Why it matters: DPIIT has recognised nearly 197,000 startups. Extending the deferral would ease cash flow pressure on employees and make stock-based compensation more viable as more startups scale, restructure, and prepare for IPOs.
What changes: Introduced in 2020, the provision allows employees to defer paying the perquisite tax on ESOPs until a sale, exit, or a specific time period, rather than paying at the time of exercise. Startups are also seeking clearer guidance on deducting Esop expenses and carrying forward losses during mergers or internal reorganisations.
Context: Esop taxation has come into sharper focus as public listings accelerate. New-age IPOs in 2025 unlocked Esop pools worth an estimated Rs 8,700 crore.
What’s next: Officials said the proposal is under review ahead of the Union Budget, with a final decision expected after stakeholder consultations.
Also Read: Sebi relaxes ESOP norms for founders of IPO-bound startups
India’s new-age IPO pipeline for 2026 is already taking shape, with a crowded slate of consumer internet and tech companies lining up for the public markets.
What's happening? PhonePe, Zepto, Oyo, Boat, Infra.Market, Shadowfax and others are collectively targeting close to Rs 50,000 crore through a mix of fresh issues and secondary sales.
Why it matters: The momentum from last year’s IPO boom cannot be taken for granted, bankers and investors warn. Public markets remain open, but investors are far more exacting on valuation discipline, cash burn and post-listing execution, particularly for companies that are still loss-making or only recently profitable.
By the numbers: New-age companies raised nearly Rs 36,000 crore via IPOs in 2025, making it one of the busiest years on record. The cohort included Lenskart, Meesho, Groww, PhysicsWallah and Pine Labs.
Investor lens: The market has shifted from total addressable market narratives to cashflow visibility and credible profitability timelines. How recent listings perform on earnings will heavily influence sentiment.
What to watch: Macro signals, the Union Budget, and potential mega-listings such as Reliance Jio will shape liquidity and appetite in 2026.
Also Read: New-age companies find a winning formula on Dalal Street: Profitability
As earnings season opens, India’s large-cap IT services firms are bracing for a muted December quarter, with brokerages flagging limited upside amid weak seasonal demand.
What to expect: Analysts see no meaningful revival in client spending during what is typically a soft quarter for the $280-billion-plus IT services industry. Sequential growth is likely to remain capped.
Large-cap players, such as Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro and Tech Mahindra, are expected to report up to 2.3% quarter-on-quarter revenue growth in constant currency terms in Q3FY26.
Tell me more:
Also Read: In IT services market, nimble midsize cos gain over large caps
What’s important: Acquisitions and 'tuck-ins' remain a major mover as companies try to plug capability gaps ahead of the next tech cycle, analysts at brokerages, including Kotak Institutional Equities, Motilal Oswal, HDFC Securities and ICICI Securities, said.
Mayank Banerjee, Matilde Giglio and Alessandro Ialongo, founders, Even Healthcare
Even Healthcare raises $20 million: Even Healthcare, which manages a hospital network, has raised $20 million in a fund by existing backers Lachy Groom and Alpha Wave, with participation from Sharrp Ventures.
Cars24 acquires CarInfo: SoftBank-backed used car sales platform Cars24 has acquired Delhi-based vehicle information management startup CarInfo. The deal size was around Rs 400-425 crore, people in the know said, adding it was a mix of cash and stock components.
Smart glasses bring privacy under the lens: Apple recently received a patent for its smart glasses, while Meta has already launched its version, and Amazon is preparing to enter the market. The future of smart glasses could see a shift towards more visual features, but could also spark greater privacy concerns.
Awfis CFO Ravi Dugar steps down: Ravi Dugar, the co-working company's chief financial officer (CFO), has stepped down from his role to pursue new career opportunities, the company said on Monday. Dugar will continue in his role till February 2, after which he will be formally relieved of his duties.
■ Disinformation floods social media after Nicolás Maduro’s capture (Wired)
■ AI start-ups take on Google in fight to reshape web browser market (FT)
■ The day the cloud went out (Rest of World)
Also in the letter:
■ IT’s Q3 preview
■ Even Healthcare raises funds
■ Cars24’s new acquisition
Union Budget 2026: Esops tax pause may be opened to more startups
The Centre is considering widening the four-year Esop tax deferral to cover all DPIIT-recognised startups, significantly expanding a benefit that currently applies to around 4,000 firms approved by an inter-ministerial board.
Why it matters: DPIIT has recognised nearly 197,000 startups. Extending the deferral would ease cash flow pressure on employees and make stock-based compensation more viable as more startups scale, restructure, and prepare for IPOs.
What changes: Introduced in 2020, the provision allows employees to defer paying the perquisite tax on ESOPs until a sale, exit, or a specific time period, rather than paying at the time of exercise. Startups are also seeking clearer guidance on deducting Esop expenses and carrying forward losses during mergers or internal reorganisations.
Context: Esop taxation has come into sharper focus as public listings accelerate. New-age IPOs in 2025 unlocked Esop pools worth an estimated Rs 8,700 crore.
What’s next: Officials said the proposal is under review ahead of the Union Budget, with a final decision expected after stakeholder consultations.
Also Read: Sebi relaxes ESOP norms for founders of IPO-bound startups
Big burst of new-age startup IPOs lined up for 2026; issues worth Rs 50,000 crore planned
India’s new-age IPO pipeline for 2026 is already taking shape, with a crowded slate of consumer internet and tech companies lining up for the public markets.
What's happening? PhonePe, Zepto, Oyo, Boat, Infra.Market, Shadowfax and others are collectively targeting close to Rs 50,000 crore through a mix of fresh issues and secondary sales.
Why it matters: The momentum from last year’s IPO boom cannot be taken for granted, bankers and investors warn. Public markets remain open, but investors are far more exacting on valuation discipline, cash burn and post-listing execution, particularly for companies that are still loss-making or only recently profitable.
By the numbers: New-age companies raised nearly Rs 36,000 crore via IPOs in 2025, making it one of the busiest years on record. The cohort included Lenskart, Meesho, Groww, PhysicsWallah and Pine Labs.
Investor lens: The market has shifted from total addressable market narratives to cashflow visibility and credible profitability timelines. How recent listings perform on earnings will heavily influence sentiment.
What to watch: Macro signals, the Union Budget, and potential mega-listings such as Reliance Jio will shape liquidity and appetite in 2026.
Also Read: New-age companies find a winning formula on Dalal Street: Profitability
Modest Q3 awaits IT big caps as weak demand curbs momentum
As earnings season opens, India’s large-cap IT services firms are bracing for a muted December quarter, with brokerages flagging limited upside amid weak seasonal demand.
What to expect: Analysts see no meaningful revival in client spending during what is typically a soft quarter for the $280-billion-plus IT services industry. Sequential growth is likely to remain capped.
Large-cap players, such as Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro and Tech Mahindra, are expected to report up to 2.3% quarter-on-quarter revenue growth in constant currency terms in Q3FY26.
Tell me more:
- TCS and Infosys are likely to post slower sequential growth amid pressure on discretionary spending.
- Tech Mahindra could see relative outperformance, aided by new leadership momentum and improving execution in BFSI.
- Wipro is expected to benefit from ramp-ups in the large deals it has recently won.
- Mid-tier firms, including Persistent Systems, Coforge and Mphasis, are forecast to clock faster revenue growth.
Also Read: In IT services market, nimble midsize cos gain over large caps
What’s important: Acquisitions and 'tuck-ins' remain a major mover as companies try to plug capability gaps ahead of the next tech cycle, analysts at brokerages, including Kotak Institutional Equities, Motilal Oswal, HDFC Securities and ICICI Securities, said.
Other Top Stories By Our Reporters
Even Healthcare raises $20 million: Even Healthcare, which manages a hospital network, has raised $20 million in a fund by existing backers Lachy Groom and Alpha Wave, with participation from Sharrp Ventures.
Cars24 acquires CarInfo: SoftBank-backed used car sales platform Cars24 has acquired Delhi-based vehicle information management startup CarInfo. The deal size was around Rs 400-425 crore, people in the know said, adding it was a mix of cash and stock components.
Smart glasses bring privacy under the lens: Apple recently received a patent for its smart glasses, while Meta has already launched its version, and Amazon is preparing to enter the market. The future of smart glasses could see a shift towards more visual features, but could also spark greater privacy concerns.
Awfis CFO Ravi Dugar steps down: Ravi Dugar, the co-working company's chief financial officer (CFO), has stepped down from his role to pursue new career opportunities, the company said on Monday. Dugar will continue in his role till February 2, after which he will be formally relieved of his duties.
Global Picks We Are Reading
■ Disinformation floods social media after Nicolás Maduro’s capture (Wired)
■ AI start-ups take on Google in fight to reshape web browser market (FT)
■ The day the cloud went out (Rest of World)
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I agree to receive newsletters and marketing communications via e-mail