Why do IPO-bound companies witness leadership shifts?

New Delhi: In India’s startup ecosystem, an IPO is often seen as a key milestone. But in several high-growth companies, leadership transitions have surfaced just as businesses move closer to public listing.

Industry experts say the timing is not always coincidental. In many cases, these changes reflect a shift from founder-led scaling to a more institutional structure suited to public markets.

“Filing for an IPO means that everything you’ve done in the past will be under a microscope to identify any discrepancies. Knowing that founders go to great lengths to achieve numbers, I believe this is a strategic cleanup,” said Himank Tripathi, brand strategy consultant.

“This way, the company establishes a fresh, professionalised setup with zero baggage before SEBI and institutional investors,” he added.

Rahul Tekwani, Founder and Managing Partner, Branding Edge, said the pattern has become more visible as India’s capital markets ecosystem has matured.

“This pattern has definitely become more visible, and it’s not accidental. It’s a function of how India’s capital markets ecosystem has matured, and how IPOs today are far more scrutinised than they were even five years ago,” he said.

At a broader level, Tekwani said, “What appears to be ‘resignations’ is often less about exits and more about role realignment.”

Companies often describe these moves as routine transitions. Industry observers said the timing can also coincide with governance reviews, investor scrutiny and the need to present a more institutional structure to regulators and public market investors.

A source closely working with startups described the pattern as increasingly familiar. “Founders suddenly resign from executive roles just as their companies gear up for IPO glory. The official script is always the same, reading about professionalisation, succession planning, or pursuing new ideas. But the timing and the aftermath raise eyebrows.”

Tekwani added that in many cases, especially in traditional or promoter-led setups, continuity is not necessarily disrupted.

“The original decision-makers rarely exit the system; they transition into board positions, strategic roles, or remain influential behind the scenes. So structurally, continuity remains intact even if the designation changes,” he said.

A recent example is boAt parent Imagine Marketing. In 2025, co-founders Sameer Mehta and Aman Gupta stepped down from executive and operational roles before the company filed its DRHP for a planned Rs 1,500 crore IPO. Both transitioned to board positions, with Mehta as Executive Director and Gupta as Non-Executive Director.

The IPO was largely structured around an offer for sale, with founders and early investors expected to sell part of their holdings. The company described the transition as part of professionalisation and appointed former COO Gaurav Nayyar as CEO.

In venture-backed companies, Tekwani said leadership changes are often influenced by investors and bankers as IPO timelines become clearer.

“Here, leadership changes are frequently influenced, sometimes directly orchestrated by private equity investors and bankers. As IPO timelines firm up, there is a preference for bringing in executives who have prior experience taking companies public,” he said.

“This is largely risk mitigation. Public market investors, merchant bankers, and regulators tend to place a premium on leadership teams that understand disclosure standards, earnings discipline, and post-listing scrutiny,” he added.

He said seasoned CEOs or CFOs are often brought in 12 to 24 months before a listing.

The boAt case also reflects a pattern that some industry observers say is becoming more visible. After stepping back from executive responsibilities, Aman Gupta moved to launch OffBeat Studios and raised Rs 100 crore in seed funding within months.

The source said this pattern can be seen across companies. “Once the first liquidity event hits, many treat the IPO as the launchpad for their next startup.”

Another example is BharatPe. In 2026, the last original co-founder, Shashvat Nakrani, stepped down from day-to-day operations during a governance reset ahead of IPO preparations. He moved into a strategic advisor and board role.

Tekwani said governance itself is a key trigger for such transitions.

“The transition from a private to a public company involves a significant tightening of disclosure norms related party transactions, revenue recognition practices, board independence, internal controls, and audit trails all come under intense review,” he said.

“In that process, any potential areas of conflict whether perceived or real are addressed upfront,” he added.

“In some cases, founders or early executives may step back from executive roles if their continued presence complicates regulatory approvals or investor perception. It’s less about wrongdoing and more about ensuring a clean, frictionless path through due diligence and regulatory vetting.”

The move marked the complete exit of original founders from executive positions at BharatPe, following years of scrutiny and earlier controversies.

Cars24 is another recent case. In April 2026, co-founder Gajendra Jangid stepped back from his role as Chief Marketing Officer after 11 years, as the company prepares for a potential IPO in the coming six to 12 months. The company described it as a natural evolution and said it no longer depends on founders for day-to-day operations.

Across these examples, observers point to the changing demands placed on companies as they prepare to move from private capital to public markets.

“It’s about the brutal mismatch between founder DNA and public-company discipline,” the source said.

That tension is closely linked to investor behaviour. Tekwani said private equity and late-stage investors become more assertive as companies approach an IPO.

“By the time a company is approaching an IPO, these investors are typically looking at a defined exit window. Their focus shifts from growth optionality to certainty of execution valuation, timing, subscription quality, and aftermarket performance,” he said.

“Leadership becomes a key lever in that equation. If they believe a change improves credibility with institutional investors or reduces execution risk, they will push for it,” he added.

Similar leadership transitions have been seen in other companies. Oyo has seen multiple senior executive exits in the years leading up to its repeated IPO attempts as it worked on governance and operations. Myntra CEO Nandita Sinha also stepped down recently as parent company Flipkart prepares for its public listing.

Even in post-listing transitions, founders moving into new roles or new ventures remains visible. Deepinder Goyal stepped down as Group CEO of Eternal, earlier known as Zomato, in early 2026 and moved to the role of Vice Chairman while building ventures such as LAT Aerospace and Temple.

In his shareholder letter, Goyal wrote, “Of late, I have found myself drawn to a set of new ideas that involve significantly higher-risk exploration and experimentation. The expectations, legal and otherwise, of a public company CEO in India demand singular focus.”

Temple raised 54 million dollars, or about Rs 450 crore, shortly after his exit.

While governance and optics explain part of the trend, financial strategy also plays a role.

“Founders typically do partial exits before an IPO to build personal wealth because an IPO is inherently a gamble, you don’t know how the market will react on listing day, and no one wants to take that full risk,” said Sinchana P Heggade of Warmup Ventures.

“Another reason is taxation. Once a company goes public, the tax impact can be significantly higher, so partial exits beforehand help optimize that,” she added.

Heggade said founders usually sell only 10 to 20 per cent to avoid sending negative signals to the market.

She also pointed to strategic dilution. “As companies prepare for public markets, some dilution allows founders to take more balanced, growth-oriented decisions once public money is involved.”

On CEO exits, she said, “These are often driven by internal conflicts with the board or differences around governance, compliance, or strategic direction.”

The source said founders often leverage personal brands, media visibility and venture capital networks to raise fresh capital for new ideas after stepping back.

Tekwani, however, cautioned against reading too much into the pattern in isolation.

“So the ‘exit before IPO’ pattern is not a red flag in isolation. More often than not, it signals professionalisation, investor alignment, and a transition from founder-led scaling to institutionally governed execution,” he said.

“The key is to read it in context: who is moving out, who is coming in, and whether the underlying control and strategic direction of the business actually change.”

The source added, “Investors should celebrate the hustle, but demand clearer succession and cleaner audits.”