Indian Startup and the Increase in Investments in IPO

Indian Startup and the Increase in Investments in IPO
Image Source: CNBCTB18

Digitization has provided an impetus to the startup ecosystem in India. Grocery shopping, catching up with friends, responding to work emails, reading the news – we live in a world where we turn to our smartphones for all of these activities and more.

Technology has been touted as the game-changer for human civilization ever since the industrial revolution.

But it’s only in the last couple of decades that we have seen just how much technology has changed our day-to-day lives.

As we emerge from the pandemic, the Indian technology startup ecosystem continues to be on a growth trajectory on the back of rapid digitalization and tech adoption.

At this instance, there is no place better than India where one can find the most tangible evidence of this wave, in the form of a tech [‘(IPO) boom that boasts of an impressive line-up of stock market listings that have generated significant interest among investors.

It all began with Zomato launching their IPO, which was recently welcomed to the bourses by investors with open arms.

Food delivery company Zomato became the nation’s first unicorn to make its stock-market debut, raising US$1.3 bn with backing from Morgan Stanley, Tiger. Global, and Fidelity Investments.

A unicorn is one privately-held startup company valued at over US$1 bn. Following the current trend, many homegrown startups are eyeing listing on the bourses in the coming months.

Let’s know which are the critical unicorn players seeking listing in India.

1. Policy Bazaar

Policy Bazaar, promoted by EtechAces Marketing and Consulting, is one of the Indian insurance aggregators founded in June 2008 by Yashish Dahiya, Alok Bansal, and Avaneesh Nirjar.

EtechAces, which houses Paisa Bazaar, may hit the primary markets with the Policy Bazaar IPO. The Gurugram based Policy Bazaar may target a valuation around US$3.5-bn ahead of its IPO.

Recently, Policybazaar’s parent PB Fintech approved a resolution to raise to ₹60 bn via an IPO, making it the fifth Indian startup to initiate proceedings to list on the national bourses.

The insurance aggregation firm has the potential to become the first of India’s mega-start-ups to debut as the country’s digital economy booms.

Started as an insurance policy price comparison website, the startup has shaped itself as an insurance selling entity.

The company claims to process nearly 25% of India’s life insurance and over 7% of the country’s retail health cover.

2. Delhivery

Delhivery is an Indian delivery and supply chain company founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati.

The company offers logistics services to several e-commerce companies.

According to some media reports, the company is expected to go public in the next 6-8 months, valued at US$3.5-4 bn. It expects to raise US$400 m to US$500 m through the public offer.

Delhivery raised US$100 m from FedEx Express, a subsidiary of global delivery services giant FedEx Corp.

The company is backed up by the Softbank Carlyle Group, Tiger Global, Stead view Capital, Fosun International, and Nexus Venture Partners.

Two weeks back, IPO-bound Delhivery said it might acquire a 100% stake in rival express logistics player Spoton Logistics for US$200 m. Acquiring Spoton Logistics will enable Delhivery to strengthen its delivery network further.

3. Nykaa

Nykaa is an Indian lifestyle marketplace for beauty, wellness, and fashion products, incorporated in 2012 by Falguni Nayar, an alma mater of the Indian Institute of Management (Ahmedabad) and former MD of Kotak Mahindra Capital.

The company has expanded from online-only to an omnichannel model to sell the products. The unicorn startup is expected to hit with an IPO, valuing the company around US$4 bn.

Nykaa, the largest in its space in India, has filed DRHP with the market regulator for its public offer.

The filing for an IPO is being hailed as a milestone for Indian markets as Nykaa is one of the few startups going for a stock market listing after declaring a profit.

The sector is dominated by global players – US e-commerce giants Amazon and Walmart-owned Flipkart, and by the likes of Sephora in brick-and-mortar.

Nykaa’s plans to offer up to 43 m shares worth ₹5.3 bn. Industry analysts see it as timely despite the pandemic.

The Mumbai headquarters startup has warehouses in Delhi, Mumbai, and Bangalore. Nykaa claims to have over 3 lakh products across 1,500 brands.

Nykaa has raised money through multiple rounds of funding. Its key investors include private equity funds like Stead View Capital, Fidelity Management,

and Lexdale International.

Also, B-town celebrities like Alia Bhatt and Katrina Kaif have invested an undisclosed amount in the company.

5. Paytm

Paytm is an Indian multinational technology company that specializes in digital payment systems, e-commerce, and finance. It’s based in Noida.

The company wants to hit the market with its ₹166 bn IPO at the earliest and likely by October.

The company had filed draft papers for its initial share sale with the market regulator on 15 July 2021.

Paytm founder, managing director and chief executive officer Vijay Shekhar Sharma and Alibaba group firms will dilute their stake in the proposed offer-for-sale.

Alibaba group firm Antin (Netherlands) Holding BV will be selling at least a 5% stake to bring its shareholding below 25% to comply with regulatory requirements.

In a similar vein, the Co-head of Research at Equitymaster, Tanushree Banerjee, talks about startups and how India is emerging as the hotbed of tech unicorns.

She discusses whether Zomato and Paytm are set to be the next Microsoft and Apple. Looking ahead, not behind…

The impressive line-up of tech IPOs that we see today is testamentary to the evolution of the Indian markets.

Gone are the days when the stock market relied upon an IPO solely based on its past performance and profits. The market is seeing value in these companies and investing in their future.

While the concerns about Zomato’s lack of profitability were raised in the run-up to its IPO, the overwhelming response by investors has helped the company’s stock grow since its debut. Two decades ago, this would have been long asked by India’s retail investors.

They perhaps, would not even consider startups until the coveted crown of profitability was achieved.

However, to today’s young investors who perhaps regularly uses the services and platforms of these tech startups to order food, compare policies while purchasing insurance, pre-owned research cars, send packages or keep up with the latest beauty trend, the value of these businesses is evident.

Start-up founders are now much more confident on this front as well, evident in the the fact that the blows from the recent second wave of the pandemic did not dampen their listing goals.

To sum up

As things stand now, India’s future new economy looks very bright indeed. However, a gold rush of sorts in the tech startup space may draw increased scrutiny from the regulators.

Therefore, one must keep an eye out for any tweaks in the regulations or compliance requirements and necessities that may surface in the coming months.

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