PE and VC Funds Pivot Exit Strategy: Block Deals Overtake IPOs
Initial public offerings (IPOs) are no longer the premier exit route for private equity (PE) and venture capital (VC) investors looking to monetize their holdings. Recent data reveals a pronounced shift towards post-listing bulk and block deals, marking a significant evolution in exit strategies within the financial markets.
The Data Behind the Shift
Analysis of market data from Prime Database highlights this trend. Since 2024, there have been 43 PE- and VC-backed IPOs where shares worth approximately ₹58,000 crore to ₹59,000 crore were sold through the offer-for-sale (OFS) route. However, this amount represents only about one-third of the nearly ₹1.9 lakh crore worth of shares sold through post-listing bulk and block deals during the same period.
An OFS during an IPO allows promoters and existing investors, including PE and VC firms, to sell shares to the public. After listing, these investors can further divest through bulk or block deals on exchanges. Over the past two years alone, more than 950 block deals were executed, underscoring a growing preference among funds to defer large exits until after listing, especially amid volatile valuations.
Historical Context and Trends
The gap between IPO-stage exits and post-listing exits has widened significantly since 2021. In that year, investors sold shares worth about ₹48,000 crore through OFS, compared with almost ₹62,500 crore through post-IPO bulk and block trades. Mint's analysis of Venture Intelligence data further illustrates this shift: in 2021, IPOs accounted for 12% of overall PE exits, with block trades at 23%. By 2025, IPO exits had shrunk to 8%, while block trades rose to 30% of exits.
The divergence peaked in 2023, when block trades surged to 47% of total exits, while IPO exits collapsed to a mere 6%. This trend indicates a behavioral shift in how private market investors are sequencing liquidity, with selling shareholders increasingly trimming the OFS component of IPOs and opting to hold back stakes for later exits through block deals and secondary sales.
Expert Insights and Rationale
Legal and financial experts attribute this shift to several factors. Abhishek Guha, a partner at Trilegal, noted that following a year of aggressive sell-downs, funds are recalibrating the pace of exits. "We expect to see many exits through block sales in 2026," Guha added, emphasizing that pricing control, discretion, and speed make block deals structurally more attractive for large financial investors.
Pranav Haldea, managing director at Prime Database Group, highlighted the evolution of the block deal ecosystem. "The block deal ecosystem was far less active five years ago. What has changed is the depth of domestic liquidity, especially from mutual funds, which are now willing and able to absorb large secondary stakes," he said. Haldea added that several private equity funds of older vintage have reached their exit phase, making block deals a preferred monetization mechanism.
Structural Advantages of Block Deals
Block deals offer greater flexibility in pricing since they are private and negotiated transactions. Buyers are typically institutional, resulting in lower market impact. Guha pointed out that "block trades can typically be executed within 24 hours, whereas OFS is a slower, process-driven route." This efficiency is crucial in a dynamic market environment.
Moreover, there are limits to how much stake can be sold in an OFS during an IPO. Vikram Gawande, an investor at Blume Ventures, explained, "If around 70% of a company is held by investors, and at most 25% of that can be sold at IPO, you are looking at roughly 15-16% that can realistically be liquidated through OFS." This constraint makes bulk and block trades, which are structurally larger, more appealing for significant exits.
Ownership Structures and Future Outlook
Changes in ownership structures have also influenced this trend. Most PEs today hold controlling stakes, making a full exit at IPO structurally impossible. As a result, IPOs increasingly function as the first liquidity event rather than the final one. The share of PE and VC exits routed through IPOs stood at about 64% in 2021 but has dropped sharply to an average of about 28% over the past two years, indicating a greater reliance on post-listing exits.
The most recent wave of post-listing exits began towards the end of 2023 and has continued since, with brief pauses due to trade-related and geopolitical disruptions. While block deals peaked in 2024 and slowed in 2025, they started to open up again in the second half of the year. Legal experts view this as normal after a phase of heavy monetization and not a structural constraint on exits.
In summary, the shift from IPOs to block deals reflects a strategic adaptation by PE and VC funds to market conditions, liquidity depth, and structural advantages, signaling a new era in exit planning for private market investors.
