After a brutal beginning to 2022, India saw a surprisingly successful listing of a venture-backed startup on the public bourses last week. But investors shouldn’t expect healthy animal spirits roaming back into the Indian IPO market just yet.
which makes its living doing logistics for other e-commerce firms in India and counts
Tiger Global and
as investors, raised about $675 million. Shares, which made their debut at 487 Indian rupees each, closed Thursday at 570 rupees. A 17% jump might seem paltry by the standards of the go-go days of 2020 and 2021, but it looks like a success when markets world-wide remain turbulent with little visibility on when they will hit the bottom.
SHARE YOUR THOUGHTS
What’s your outlook on India’s IPO market? Join the conversation below.
But tech entrepreneurs shouldn’t be popping the Champagne just yet: A new barrage of IPOs from Indian tech companies, especially ones with high cash burn and a long path to profitability, isn’t in the offing. After being burned by the IPO boom last year that saw the debuts of
Nykaa, Paytm and PolicyBazaar, investors are skeptical about technology firms and might remain so for another 12 to 18 months.
Instead, a few brave companies with positive cash flow might test the markets in the later part of the year—if the broader market recovers a bit. Many tech unicorns such as Oyo Hotels & Homes, online pharmacy PharmEasy, fintech player MobiKwik and e-commerce firm FirstCry are unlikely to IPO soon.
Hemang Jani,
equity strategist at Motilal Oswal Financial Services believes that since most investors haven’t made money from IPOs last year, they remain quite skittish. He thinks when the market stabilizes a bit, India might see some revival in IPOs but the appetite will only be there for companies with reasonable valuations and strong cash flow.
Of the 23 Indian companies that have gone public so far in the second quarter this year, Delhivery is the only tech firm backed by venture capital and private equity, according to data from market intelligence provider Tracxn Technologies. Delhivery’s equity sale was oversubscribed only 1.63 times, largely supported by qualified institutional buyers. Noninstitutional investors, retail individuals and employees placed fewer bids than the quota reserved for them—a sign that retail sentiment, at least, remains deep in the doldrums.
And that tepid response was despite the fact that the company had slashed the IPO size by 30% after postponing the debut. Both SoftBank and Carlyle offloaded a smaller stake in the IPO than previously planned. Delhivery chose to list in choppy markets as it needs cash to chase acquisitions. CEO Sahil Barua entered the market with a humble ambition of “the stock should never trade below the IPO price.”
If that doesn’t reflect the bearishness of Indian IPO markets, what does?
Write to Megha Mandavia at megha.mandavia@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Read More:India’s Tech IPO Market Thaws Out, Just a Little
2022-06-03 05:13:00
