Despite the pandemic, year 2021 was a bright year for the IPO market, globally. IPO volume and proceeds reached new heights. Overall, 2021 saw a total of 2,388 deals raising $453.3 billion in proceeds, a 64 per cent and 67 per cent respective increase year-on-year, reveals latest Ernst & Young (EY) Global IPO report. The upward trend had a corresponding response in the domestic market too. Number of IPOs grew 156 per cent from 43 in 2020 to 110 deals in 2021 while IPO proceeds jumped 314 per cent to $16.94 billion from $4.09 billion in the previous year.
Amid this massive tailwind at the public market, a crucial shift in the country’s start-up growth trajectory is taking shape and force. A bunch of India's most valuable start-ups or new-age technology companies are now seeking to upend traditional performance/profit-based investment theses and allure investors to bet on their loss-making ventures on the public market.
Food delivery platform Zomato initiated this shift, becoming the first Indian unicorn to hit the public market. Its IPO was subscribed more than 38 times and garnered bids worth more than Rs 2 lakh crore. It was a watershed moment for the start-up world. Cashing in on the market vibrancy, the company listed its shares at a premium and commanded an eye-watering valuation of Rs 89,450 crore, triggering a liquidity rush into the start-up world.
What followed was a bittersweet rush of start-ups to piggyback on the momentum.
Online beauty retailer Nykaa’s Rs 5,352-crore initial public offering was subscribed 82.4 times. Shares of Nykaa was listed at a premium of 79 per cent to the issue price at Rs 2,001 per share and the company achieved a market cap of Rs 1 lakh crore on listing day. The listing made its founder, 58-year-old ex-banker Falguni Nayar, India’s richest self-made female billionaire, and her family trust offices now have a collective worth of about Rs 54,831 crore. It’s also quite notable that the company she founded in 2012 is the first profitable Indian start-up unicorn to hit the public market.
The IPO of PB Fintech (Policybazaar), which closed for bidding on November 3, received bids for 57.23 crore equity shares against 3.45 crore shares on offer, resulting in 16.58 times subscription. The company received bids worth Rs 56,093.64 crore. Its shares were listed at a premium of 17.34 per cent at Rs 1,150 on the NSE against the issue price of Rs 980. The stock touched an all-time high of Rs 1,470 on November 17, 2021.
However, the biggest dud was the most anticipated listing of the year. Paytm’s public offering, the biggest IPO till date, was oversubscribed 1.89 times. It raised $1.1 billion from institutional investors and received $2.64 billion (approximately Rs. 19,658 crore) worth of bids for the remaining shares on offer. It surpassed Coal India (Rs 15,475-crore IPO) and Reliance Power (Rs 11,700 crore IPO) in terms of issue size.
However, its public market journey kicked off with a 27 per cent fall over its IPO price on November 18. The scrip listed at a discount of 9.30 per cent at Rs 1,950 on the NSE against the issue price of Rs 2,150 per share. The crash wiped out Rs 40,000 crore of investor wealth on the first day. The stock has been on a roller-coaster ride since its listing. It touched a 52-week high of Rs 1,961.05 on November 18, 2021, and a 52-week low of Rs 1,271.25 on November 22, 2020.
In line are OYO, Delhivery, PharmEasy —which have all filed paperwork for their IPOs, and a slew of others, like Flipkart, Ola, BYJU’S, InMobi, Pine Labs, Rebel Foods, and CARS24, are in the process of doing so. There will be at least 20-30 start-up IPOs in the next 12-18 months.
With strong operating models, a solid consumer and supply base, large market opportunities and improving unit economics, these companies are expected to achieve greater revenue growth momentum in the years to come and fast-track their path to profitability.
The year marks a definite shit to India’s story. The inflection point for India’s start-up story has arrived. Market analysts believe 2021 will be remembered as the beginning of the end of the dominance of traditional business houses at the bourses. A paradigm shift is underway in how Indian investors look at the public market. They have seen how this shift played out in the US markets where tech stocks continue to be the fastest-growing stocks. A decade down the line, it wouldn’t come as a surprise if technology- and Internet-related shares dominate Indian stock markets as domestic and global investors are racing to maximise their tech exposure on Indian bourses.
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