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As markets turn jittery, so do start-ups and their plans to go public; here's why

As markets turn jittery, so do start-ups and their plans to go public; here's why

At least three big start-ups, including Delhivery, Mobikwik and Pharmeasy, which have already received SEBI nod for their IPOs have not gone ahead with the listing. Although, sources say that the listings have not been cancelled.

Startups are delaying their publc listing plans amid volaitility in markets Startups are delaying their publc listing plans amid volaitility in markets


 
If 2021 was a breakthrough year for India’s new-age tech companies in terms of listing on stock exchanges, the start-ups are going easy on their plans to go public this year. At least three big start-ups, including Delhivery, Mobikwik and Pharmeasy, which have already received the nod from the Securities and Exchange Board of India (SEBI) for their respective IPOs have not gone ahead with the listing. Although, as sources say, the listings themselves have not been cancelled.
 
Multiple factors, such as volatility in global / domestic markets in the wake of Russia-Ukraine war, tech stocks taking a beating globally and an underwhelming response to the Paytm IPO followed by price correction in most of the new-age company share prices, has led the start-ups to take a cautionary approach when it comes to their listing plans. Sources told Business Today that the large investors particularly have not been keen on going ahead with the proposed IPO plans and are taking a hard look at the valuation the firms are expecting to raise the money at from the public markets.
 
“The concern could be that some of these investors may not be able to even get back their money if they quote the valuation of a firm which was there last year. The markets have changed so much since and the rising commodity prices in the wake of Russia-Ukraine war impacts the public markets too. Hence, valuing the companies like last year will not be fair and the companies may have to relook at the exercise,” said an investment banker on the condition of anonymity.

 
Emails sent to Delhivery, Mobikwik and Pharmeasy by BT didn’t elicit any response at the time of filing the story. Their comments will be added as and when BT receives them.
 
In home-grown markets, delay in the IPO by state-owned Life Insurance Corporation of India (LIC), which aims to raise Rs 60,000 crore, as per market watchers, has also led to a domino effect, thereby affecting the listing plans of the start-ups.
 
“There was a huge interest from retail investors last year when it came to new-age Internet firms. Zomato was able to ride on that wave and got a bumper listing. But soon after, the questions on the business models and profitability rose, which led to a fee fall of Paytm's stock price. If the government is postponing the listing plans of a company as big as LIC, the start-ups definitely cannot be blamed right now. Moreover, the founders are also worried that when the LIC IPO happen, the retail investor appetite may slow down post the listing,” a top unicorn co-founder said.
 
Industry insiders also say that re-working the Draft Red Herring Prospectus (DRHP) may also be considered by the IPO-headed start-ups this year. Insiders say the start-ups need to take a realistic view in terms of the issue size and their valuation figures. Another factor affecting the listing plans is also the timeline provided by SEBI wherein the firms would have 1 year from the date of the market regulator's approval to decide upon the timeline and also the issue size of the IPO.
 

 

Published on: Mar 31, 2022, 7:01 PM IST
Posted by: Bismah Malik, Mar 31, 2022, 6:40 PM IST