From Zomato To PolicyBazaar To Flipkart — Will 2021 Bring A Parade Of Startup IPOs?

Demonstrating profitability has often been a thorn in the side of Indian startups and unicorns, but their appetite for initial public offerings (IPOs) is only growing by the month. Held back by Indian regulations, Indian startups have often had to put their IPO plans on the back burner and rely on venture capital or private equity investments. 

As they wait to turn EBITDA positive to satisfy the regulatory requirements for a public listing, startups are also considering launching IPOs overseas with less stringent profitability requirements. 

Nevertheless, each year, some seasoned startups that are close to profitability announce plans to move forward on their plans for an IPO in India. These plans are often helped by the Securities and Exchange Board of India (SEBI) amending its existing criteria for companies looking to list on domestic bourses. 

This year, SEBI, in a consultation paper, has proposed nine changes to its Innovators Growth Platform (IGP) framework based on inputs from startups and other market participants and has sought public comments on the same by January 11, 2021.

The regulator has recommended reducing the hold period before listing from two years to one year. A holding period is the amount of time the investment is held by an investor or the period between the purchase and sale of a security. SEBI believes that a holding period of one year would lure investors who are looking for an early listing of the startup at the time of investing. The current rule seeks 25% of the pre-issue capital required to be held by eligible investors for two years. 

An Inc42 Plus story from August this year, titled, “Indian Startup IPOs – Still A Pipe Dream?”, examines some of the challenges, both regulatory and otherwise, faced by Indian startups which plan to go for IPOs in the near future. 

Meanwhile, the Companies (Amendment) Act, 2020, passed by Parliament in September this year, empowers the central government to allow certain classes of public companies to list classes of securities (as may be prescribed) in foreign jurisdictions.  

In October, it was reported that the Union Cabinet had given its nod for doing away with the dual listing requirement for Indian startups. As per the earlier rules, only Indian listed companies were permitted to list abroad. However, the rules in the new policy are expected to allow companies to directly list overseas in certain jurisdictions.

Below, we look at some of the startups that have announced their plans for going public in 2021. 

Zomato Looks To Replicate DoorDash Magic

Indian foodtech unicorn Zomato has planned for an IPO in the first half of 2021 and there’s plenty of excitement in the air given the recent success of DoorDash in the US.

Founded in 2008, Zomato’s recent revenue performance was strong, growing 105% in FY 2020 from the previous year. Over the same period, the company’s losses also grew by 47%. In the first quarter of 2020-21, the current fiscal year, the company’s earnings stand at $41 Mn while the losses stand at $12 Mn.

Based on Zomato’s revenue in the first quarter of the current fiscal year, it looks like FY21 wouldn’t be as profitable for the company as FY20. Assuming that the average quarterly revenue for Zomato will be between $41 Mn and $45 Mn, the expected annual revenue for FY21 will be in the range of $165 Mn-$180 Mn. Compared to FY20, the current financial year might bring a revenue decline of approximately 54% to 58% for the company.

This year, the company has raised more than a billion dollars. Its most recent funding round happened last week when it raised $660 Mn from 10 new investors. The funds have been raised at a post-money valuation of $3.9 Bn. 

Zomato has reportedly appointed Kotak Mahindra Bank as the lead merchant bank for the proposed initial public offerings (IPO) and is looking to hire more bankers for the same. The company has also brought in Cyril Amarchand Mangaldas and Indus Law as legal advisors.

PolicyBazaar Ponders Dual Listing

Online insurance aggregator PolicyBazaar’s cofounder Yashish Dahiya told Bloomberg that the startup plans to raise $250 Mn in a round of financing at a valuation of $2 Bn, before issuing its initial public offering (IPO) in September 2021. 

PolicyBazaar is planning to go public next year, at a valuation of more than $3.5 Bn. Dahiya has said that the IPO size will be $500 Mn. PolicyBazaar plans to list in Mumbai, but Dahiya is open to a dual listing. 

Many startups have incorporated in the US and Singapore, where public listing rules and other considerations are friendlier. 

Founded in 2008 by IIT Delhi and IIM Ahmedabad alumni Yashish Dahiya, Alok Bansal and Avaneesh Nirjar, PolicyBazaar is owned by EtechAces Marketing and Consulting and is headquartered in Gurugram. The company also has two other sister companies — PaisaBazaar, which is a lending marketplace, and healthtech venture DocPrime.

PolicyBazaar turned profitable in the financial year 2017, but a year later it registered INR 9.42 Cr in losses. FY2019 turned out to be tougher for PolicyBazaar as its losses shot up 21.6x to INR 213.12 Cr.

Despite booking a loss, the company’s revenue jumped three-fold while it doubled both market share and valuation at the end of FY20. During 2020-21, Dahiya said the company should log revenue of INR 1,100 Cr and post a marginal profit.  This year, the company picked up $130 Mn from existing investor SoftBank Vision Fund.

Droom Banks On Fintech Play Before IPO Target

Droom founder Sandeep Aggarwal has said the company plans to get listed on Nasdaq in 2021 through its Singapore-based holding entity, and could also look at a possible Hong Kong stock exchange listing post the Nasdaq IPO.

Last year, Aggarwal told Inc42 that Droom was projecting $3.5 Bn in GMV and $120 Mn in net revenue in annual run-rate by December 2020, which it says is the level that the Droom would like to be at before going for the IPO. However, those projections were before the pandemic disrupted businesses across sectors, and Droom is yet to raise the pre-IPO round it claimed it is in the market for.

In October this year, Droom acquired Delhi-NCR based augmented reality (AR) startup Visiolab Ideas for an undisclosed amount. Droom’s last funding round was its Series F round worth $10 Mn in June 2019, following which it acquired NBFC Xeraphin in November to bolster its credit and financial services vertical. 

Droom, headquartered in Gurugram and with subsidiaries in the US, offers four marketplace models — B2C, C2C, C2B, and B2B — and three pricing formats — fixed price, best offer, and auction for the used cars and new cars segments. Droom also offers other automobile-related services such as insurance, loan and warranty. It claims to have a presence in more than 1000 Indian cities, with a monthly audience of over 45 Mn.

Flipkart Looks At US IPO With Walmart’s Backing

In September, Reuters reported that Walmart was planning an IPO for Indian ecommerce major Flipkart in 2021. The report mentioned that the IPO could value Flipkart at over $50 Bn. 

Bengaluru-headquartered Flipkart would likely choose between Singapore and the US for its IPO. 

Recently, Walmart CEO Doug McMillon reiterated the company’s commitment to seeing Flipkart go for an IPO overseas. The US would make most sense from Walmart’s point of view given its massive influence in that market.

The Walmart chief executive also noted that with both Flipkart and its digital payments company PhonePe growing at a quick pace, both companies have room for more investors, and could diversify in several ways, including IPOs.

Flipkart India reported a 12% growth in its revenues for the year ended March 31, 2020, at INR 34,610 Cr, and at the same time cut its losses by 18% to INR 3,150 Cr. Considering this situation, it is a near-certainty that Flipkart will be looking to list abroad, given India’s profitability crtieria for public listing.

Grofers Looks To Beat Bigbasket To IPO Punch

Gurugram-headquartered online grocery delivery platform Grofers may not be a unicorn yet like Bigbasket, but it has claimed turning operationally profitable in January this year. In July, the company said that it was on track to turn EBITDA positive by the end of this year. Initially planning to go for an IPO in 2022, the company is believed to have advanced those plans, and is now planning its IPO next year. 

The company has claimed that it witnessed a surge in demand amid the pandemic. In May, it was reported that Grofers had registered a 60% increase in its gross merchandise value (GMV), compared to pre-Covid-19 levels.

The online grocery delivery company, founded in 2013 by IIT graduates Albinder Dhindsa and Saurabh Kumar, has also opened up three new warehouse facilities and another two are in the pipeline (Bhiwadi and Lucknow). By the end of this year, Grofers aims to add nearly 10-15 more facilities to maintain a constant supply of goods for its customers.

Grofers cofounder Saurabh Kumar has said that the company posted $1 Bn in GMV for the fiscal year 2019-20 (FY20). Kumar has further claimed that the company is on the road to double its GMV every year, to hit $4 Bn by 2022.  The company last raised funds worth $43.2 Mn in a corporate round in November 2019. It is said to be in talks with Softbank for $55 Mn in funding, which could see the startup enter the unicorn club, before a potential IPO

Delhivery Rides On Ecommerce Wave To IPO 

SoftBank-backed logistics unicorn Delhivery is looking to go public in the upcoming year. The company’s COO and CBO Sandeep Barasia has noted that Delhivery prefers to list in India. 

The Gurugram-based logistics company has also amended its Articles of Association (AoA) to include the scope for a public listing as a secondary exit for existing investors, according to the documents sourced from the Ministry of Corporate Affairs.

The company had initially planned to go public in 2019. However, that planned listing would have coincided with the Indian general elections and hence, it wouldn’t have been the opportune time for getting the requisite attention for the company’s IPO. 

Delhivery was founded in 2011 by Mohit Tandon, Sahil Barua, Bhavesh Manglani, Kapil Bharati, and Suraj Saharan and provides a full suite of logistics services such as express parcel transportation, LTL and FTL freight, reverse logistics, cross-border, B2B & B2C warehousing and technology services. The company claims to be catering to 17,500 pin-codes and 2,000 cities.

In the fiscal year 2018-19, the latest figures available, Delhivery’s losses had surged 160% to INR 1,781.03 Cr, while the revenue had increased 58% to INR 1694.97 Cr. 

In August, PTI reported that the company was planning to invest up to INR 300 Cr in the coming 18-24 months on expansion, including increasing fleet size and setting up of trucking hubs, to meet the increased demand for more organised players in the sector in the wake of COVID-19 pandemic. The company has claimed that it recorded INR 2,800 Cr in revenue in FY20 and expects to grow 35-40% by the end of the current financial year (FY21). 

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