Where Are The Indian Startup IPOs? Slowdown Derails Public Listing Plans For boAt, PharmEasy & Others

There was a period in 2021, when Indian startups released draft red herring prospectus for potential initial public offerings (IPO) so frequently, that we couldn’t help but be amazed at how confident some of these companies were.

Besides the 11 startups that went public, eight other tech companies filed DRHPs in 2021. And in 2022, this momentum continued with the DRHPs from nine companies including the likes of boAt, Portea, Digit Insurance, Yatra, Paymate and others.

Despite this rush only two companies — Delhivery and Tracxn — have listed and both had filed their pre-IPO papers last year. In essence, none of the other startups that filed their prospectuses this year are close to an IPO.

The Zomato IPO, the much-hyped Paytm listing, Nykaa’s bumper debut had set off a wave of optimism. Looking back now, that DRHP frenzy seems almost surreal. The list of stalled or deferred IPOs is growing by the week, even as the markets have turned sour for the listed startups.

Now, there are fears about the bloodbath getting worse as the lock-in periods for Nykaa, Paytm and Policybazaar are on the verge of ending. Plus the war-like situation in Europe has also complicated the foreign investment situation. The startup IPO parade has well and truly stopped to take a breather in 2022.

The State Of Indian Startup IPOs

The likes of Droom, OYO, boAt, Snapdeal, and PharmEasy have more or less changed their view on IPOs in 2022. While some of these startups have withdrawn their plans, many others are reported to be in the process of doing so, with electronics company boAt being the latest one.

In the case of MobiKwik, the SEBI’s approval is set to expire by the end of October 2022, while ixigo’s SEBI approval will lapse in December 2022.

Gurugram-based fintech unicorn MobiKwik widened its losses in FY22 by 15%, and has said that it will defer its plans for an IPO till the market volatility settles.

On the other hand, ixigo has made the most of the rebound in the travel segment and returned to profitability in its latest quarterly report. This is likely to spur an expedited run at the stock exchanges, but at the moment, there’s no update from ixigo on a potential listing date.

Meanwhile, even potential US listings of BYJU’S and Pine Labs have been put on hold. Edtech giant BYJU’S wanted to take a SPAC route to listing by acquiring 2U, but the deal has seemingly broken down and the company has turned its focus to profitability and sustainability. Similarly, Pine Labs was said to be exploring a listing in the US earlier this year, but those plans have not transpired.

In a surprise move, Zoomcar announced its plans to list in the US after signing a SPAC deal earlier this month, but its business in India continues to be on shaky ground after a complete disruption during the pandemic.

While last November was all about Paytm’s mega IPO after Zomato’s high-profile listing, one year later, just two other tech companies have gone public.

 

When one says that the market for IPOs is not great right now, the data is a clear indication. According to Prime Database, the INR 35,456 Cr raised by 14 Indian corporates through IPOs till September FY23 is a decline of 32% compared to the first six months of FY22 (April-September).

 

Over 58% or INR 20,557 Cr of this was raised just by LIC in its IPO. In FY23 till September, the overall public equity fundraising fell by 55% compared to the same period in previous year. A lot of this has to do with the slowdown in foreign portfolio investments in key startup sectors.

With the exception of July and August, the net FPI inflow in 2022 has been negative for every single month, as per NSDL data. Though it seems to have slowed down in October, there’s no guarantee that it will not slide further. That’s because traditionally November and December are seen as sell-off months for investors who are looking to book profits.

Newly-Listed Companies Bleed In Q4

Given that sell-offs have resumed in September, all listed new-age companies are nervously watching the next few months.

Delhivery listed in May 2022, while Tracxn made its public debut in October. But neither of these have managed to avoid the wrath of investors who are more than happy booking profits. This has given further pause to Indian startups that had eyes on IPOs in 2022.

While Tracxn opened positively (4% premium), over its first week, it has seen an 11% drop in share prices. Prashanth Tapse, senior VP of research at Mehta Equities said the firm has advised allotted investors to book profits due to gloomy outlook. “Risk takers can hold with high risk and if investors wish to add Tracxn on listing day better to wait and watch before going aggressive,” he added.

After a relatively good opening, Delhivery got a major jolt last week. The ecommerce logistics tech company’s revenue projections have taken a hit because of macroeconomic and inflationary pressures. As a result, it is down by over 28% since its listing, as of October 26, 2022.

In its business performance update for Q2 FY23, Delhivery said that the consumer sentiment was still negative around discretionary spending and it is likely to remain muted due to continuing inflationary pressure.

This is backed by the flat or lower average user spend and the lower number of online shoppers this festive season. The negative sentiments around consumer spending is not only restricted to Delhivery, but other consumer startups such as Nykaa.

Over the past month, Nykaa’s shares have lost 10% of their value, just ahead of the end of the lock-in period for Nykaa’s pre-IPO investors. “While Nykaa is certainly a differentiated play, the fact that 12%+ shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa,” JM Financial said in a recent research note.

War Fears Hurt IPO Sentiments

The selloffs are set to intensify for Nykaa, Policybazaar and Paytm in the next month as each of their lock-in periods is set to expire. This is expected to lead to further decline in the share prices and might finally bring the valuations of these companies in line with the market expectations.

However, there’s still some way to go before the tide turns completely. And the Indian market might not bounce back as quickly as the US, which was where the slowdown was first seen in December 2021 as tech stocks crashed.

“We are likely to see a change in fortunes in the US before the Indian market. The US market is typically one where investors see more value in terms of dividends, so whenever the rebound happens, it will be first seen in Nasdaq as far as tech stocks are concerned,” according to one senior market analyst, who declined to be named as their brokerage firm offers coverage for many listed new-age companies.

One only needs to look at the timeline of the potential Zoomcar listing post its SPAC deal announced earlier in October. The auto rental startup is likely to only list in the second quarter of 2023 as per its announcement which states an H1 2023 timeline.

This allows plenty of time for the market sentiments to turn, but there’s no guarantee given expected global fiscal policy pressures such as increase in central bank lending rates or macroeconomic events such as war in Europe.

The situation in Europe is expected to have far-reaching consequences in portfolio allocation of some investors, who are likely to move assets around to industries that might see a bigger upside in such a crisis.

The prospects of travel tech startups such as ixigo, OYO and others might also be impacted due to any war erupting in Europe. That’s after two years of complete disruption to the travel industry.

Concerns over the aggressive rate hike by the US Fed to control rising inflation, sharp depreciation in rupee, and fear of a global recession have fuelled pessimism among investors.Continuing Russia-Ukraine war also dented sentiments of IPO-bound Indian startups.

Any startup that depends on international travel and exports for growth will likely see a slowdown in the next few months depending on the evolving situation.

It’s no surprise then that the Indian startup IPO momentum seen in the latter half of last year has come to a screeching halt. Plenty of companies will be going back to SEBI with addendums as OYO has done and many others are likely to reduce their valuation asks from their IPOs.

Correction Note (October 31, 2022; 7 am)

• We have updated the infographic at the top of the article to more accurately reflect the current status of potential tech startup IPOs in 2022