The Indian Startup ecosystem has shown tremendous growth in the last 3-4 years. The year 2021 is bringing plenty of IPOs(Initial Public Offering) from India. Nazara Technologies IPO success has brought good news for India. A couple of such IPOs will set the stage for startups. Startups will get a clear picture of whether the high valuation will help them in long run or not.
Not only that, these IPOs will decide the future of the startup ecosystem as well. Success or failure, IPOs will impact the coming years of startups. IPO success makes sure that we have built a strong startup ecosystem accepted by the public.
Four Major Companies Listing in the Coming Months
Half a dozen Indian Startups are under process for IPOs, as per the media reports and different sources. It includes the names of online food delivery time Zomato, fashion brand Nykaa, e-commerce logistics firm Delhivery, and online insurance startup Policybazaar.
Other names like Flipkart, software firm Freshworks names are also continuously floating but the above four are in the final stage of the process. They are planning to get listed in India through the Bombay Stock Exchange or the National Stock exchange. Other companies like PepperFry, Mobikwik, Oyo, Paytm, and Byju’s have shown interest in IPO but it may take time for listing.
Zomato, Nykaa, Delhivery, and Policybazaar are the major contenders for IPO. Their listing will bring more charities about Indian Startups. These four firms have a total valuation of $18.5 billion. Zomato alone has a market cap of $8 billion while the other three firms’ valuation comes in the range of $3-4 billion.
Nykaa and Policybazaar did not reveal any information related to the listing while Delhivery and Zomato did not reply to the mails sent by MoneyControl.
Effect of IPOs on Indian Startup and Economy
India is doing well in terms of the latest IPO success. The Indian Startup ecosystem is riding high on the IPO successes of Nazara Technologies, Burger King to Indigo Paints. Current market sentiments are high. India has observed a few IPO successes in the last couple of years.
Once these four startups go for listings, it will bring the market to a new level. The combined market cap of these IPOs is 67% more than the top five IPOs of the last two years combined if you don’t include the mega IPO of SBI Cards — a unique deal for a mature and very profitable company.
Coming IPOs will also indicate the Indian economic condition. Their success will be the silver lining for the Indian Economy. In the US and China, technology-driven companies are generating maximum profits. In India, the scenario is different. Traditional startups are still having an upper hand in the Indian Startup Ecosystem.
Vidisha Krishan, the partner, capital markets and corporate laws, at law firm MV Kini, said:
“For startups looking to go public, it can’t be just a numbers game anymore, and they can’t list just based on projections. The data has to be far more concrete. Not just valuations based on accepted accounting standards, but also strong market and business fundamentals.”
Securities and Exchange Board of India (SEBI) requirements are also very strict. Before listing, it asks the company’s business plans, risks, profits, and money usage.
Most of the listed companies are not making any profit. In such companies, regulators don’t allow more than 10% retail investment of the IPO issue size. In a profit-making company IPO, retail investors can subscribe up to 35% of an IPO size.
The first wave of startup IPOs, at least, is expected to be geared towards institutional investors. Talking about institutional investors, Bhakta Patnaik, partner and head of capital markets at Trilegal, said:
“We expect most of the internet company IPOs to be focused on institutional investors. These investors can evaluate valuations and may have a more long-term outlook.”
Stock experts are not sure whether companies like Zomato can justify their rich valuation after listing. Will it remain high after a few months of listing. It is very difficult to tell.
Patnaik further added:
“Investors are advised not to value companies based on the projections of future earnings. But because of macro optimism and expectations of a V-shaped recovery, there is a lot of liquidity, and thus internet companies could well get the valuations they want.”