An $8.8 billion IPO wave sweeps across India as startups soar

INTERNATIONAL DESK: The marketplace for preliminary public choices (IPO) in India is popping right into a feeding frenzy.

The quantity of cash raised in IPOs this 12 months has reached $8.8 billion, already surpassing the totals of the previous three years although it’s solely August.

At the present tempo, 2021 would exceed the all-time document of $11.8 billion. Founders, bankers, legal professionals and advisers are racing to money in on fervent demand for contemporary public choices.

The catalyst, in a phrase, is Zomato Ltd. The meals-supply startup went public in July and, regardless of deep losses and mediocre prospects for profitability, shares have soared greater than 70%. That has fueled the concept that equally revenue-challenged startups may discover a robust reception from traders.

Oyo Hotels & Homes Pvt, a protracted-troubled lodging big, began work final week on its draft prospectus and goals to file in October, based on folks conversant in the matter. The trip-hailing chief Ola and fintech startup Pine Labs Pvt have additionally begun talks with funding bankers, based on different folks conscious of the state of affairs.

“India is definitely the star of the show – that is the new phenomenon,” said Udhay Furtado, co-head of Asia equity capital markets at Citigroup Inc, the lead foreign bank in Asia IPO league tables so far this year. “Zomato really opened people’s eyes to India and now we have all these privately funded unicorns coming to the public market.”

The performance of recent IPOs, such as Zomato, has fed the enthusiasm. Newly listed Indian stocks are beating the benchmark Nifty 50 Index by more than 40 percentage points this year, the biggest gap in seven years.

The country’s three most valuable startups are all considering or planning IPOs. Paytm, the country’s leader in digital payments, filed its preliminary offering documents, aiming to raise as much as Rs 16,600 crore ($2.2 billion). If it reaches that level, the IPO would be the country’s largest debut ever, eclipsing the more than Rs 15,000 crore raised by state-owned Coal India Ltd.

Flipkart, the e-commerce giant controlled by Walmart Inc, is aiming for an IPO as soon as the fourth quarter, Bloomberg News has reported.

Byju’s, a digital education startup valued at $16.5 billion, is in early discussions about an IPO and bankers are encouraging the company to take advantage of the red-hot market, according to people familiar with the matter. Byju’s is in the midst of absorbing several substantial acquisitions and is likely to hold off on any listing for at least a year.

Such is the hysteria that PhonePe, a payments startup Walmart acquired as part of its Flipkart deal, is considering shifting its incorporation back to India from Singapore to capture local investor attention, according to two people familiar with the matter who did not want to be identified.

The regulatory upheaval in China has also sent investors looking for promising opportunities in countries with more predictable government policies.

“If global investors have to pick an emerging market, the balance is tilting in India’s favor after the regulatory action in the China internet ecosystem,” said Pankaj Naik, executive director and co-head, digital & technology at consultancy, Avendus Capital Pvt. “India may not be as attractive as China in the broader economic sense but it’s looking like a safer bet.”

Oyo Hotels, PhonePe and Pine Labs did not respond to emails seeking comment.

India’s success with startups has long lagged beyond that of the US or China. But this year has been something of a breakout. With the Covid-19 pandemic, many consumers have turned to online services for grocery deliveries and other e-commerce, along with math tutoring and medical diagnoses. Revenue has surged.

Global investors like Fidelity Investments, KKR & Co and Singapore’s Temasek Holdings Pte have pumped money into India, while China’s crackdown on private enterprise has spooked financiers.

The value of venture investments in India reached $7.9 billion in July, surpassing China for the first time on a monthly basis since 2013, according to researcher Preqin Ltd.

That kind of financing has helped India build a substantial blessing of unicorns, startups worth $1 billion or more. There are more than 35 such companies, led by Byju’s, Paytm and Oyo, according to CB Insights, suggesting dozens more could go public in the years ahead.

Whereas the biggest IPOs of the past were conglomerate or state-backed companies like Coal India, startups are now leading the surge.

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“Many of India’s know-how unicorns have enormous progress alternatives forward of them,” said Devarajan Nambakam, a managing director at Goldman Sachs Group Inc. in Mumbai. “Everything is relative and given the huge alternative, India’s macro fundamentals, political stability and total funding insurance policies make it one of the higher locations for world traders.”

Investment banks such as Goldman, Morgan Stanley, JPMorgan Chase & Co and Citigroup Inc are on the forefront of a number of discussions, the folks mentioned. Mumbai-headquartered Kotak Mahindra Bank’s funding banking crew can be half of a number of of IPO conversations, the folks mentioned.

Oyo, a GentleBank Group Corp-backed startup with a historical past of troubles, is one of the extra stunning IPO candidates. The lodge-reserving firm, run by 27-12 months-outdated Ritesh Agarwal, botched a world growth with overly aggressive targets after which was hammered by the Covid-19 pandemic.

Last 12 months, it minimize its workforce, furloughed 1000’s and slashed compensation and advertising and marketing as it retreated.

But the brutal overhaul allowed Oyo to outlive as folks stopped touring and now bookings are recovering in Europe, the US and components of Asia. Agarwal, in an interview with Bloomberg TV, mentioned the coronavirus pandemic hit Oyo like “a cyclone” with enterprise falling 66% in 30 days.

But the corporate made tough modifications to deal with the know-how and providers most precious to its lodge companions. The startup just lately secured a $660 million debt financing from world traders to service its current loans.

Work started this week on Oyo’s draft prospectus with the purpose of submitting with regulators throughout the subsequent 10 weeks, mentioned an individual conversant in the developments. Two banks, Kotak and JPMorgan, have already been chosen and Citi is near being added to a lineup that’s more likely to develop. The timing, dimension and mix of major and secondary shares have but to be determined, a number of folks mentioned.

Agarwal declined to remark particularly on IPO plans in his interview.

“We are already operating like a public company, when we go public is up to the board,” he mentioned.
If Agarwal does check the general public markets, he can have a lot of firm. Beauty retailer Nykaa filed its preliminary providing paperwork this month for a share later this 12 months.

API Holdings, the proprietor of the nation’s largest on-line pharmacy PharmEasy, is focusing on an IPO of greater than $1 billion with plans to file preliminary paperwork by mid-October, based on folks conversant in the matter.

Pine Labs, a fintech startup that operates in India and components of Southeast Asia, is being courted by bankers who declare it may attain a $10 billion valuation, based on an individual with information of the discussions. It was final valued at $3 billion, based on CB Insights.

“Indian public market investors have shown that they do indeed value the role of disruption and growth,” mentioned Vani Kola, founder and managing director of the enterprise agency Kalaari Capital. “We will see hundreds of such IPOs over the next decade.” (Times of India)