As India’s tech boom continues, these days it’s no longer unusual to hear of companies going public. But it’s still difficult for investors to gauge how the market will develop in the long term.
Over the past two years, the Indian startup ecosystem has changed dramatically. A new wave of venture capital has brought companies in India into the spotlight of global investors. In 2017, the top story was about the unicorn companies in India. With the increasing number of fresh funding rounds and IPOs, Indian entrepreneurs are gaining exposure in Silicon Valley.
If you thought Silicon Valley was the epicenter of technology innovation, think again. As technology and e-commerce go mainstream in India, the capital of the world’s largest democracy could soon be a hotbed of tech innovation and investment. This is because several of the country’s biggest start-ups have plans to list on U.S. exchanges, and that could pave the way for more tech IPOs in India.
NEW DELHI, India— As companies want to access a stock market that has shown robust despite Covid-19, India is preparing up for tech IPOs, including two worth more than $1 billion.
According to bankers, the initial public offerings represent the maturation of a generation of e-commerce and digital-economy businesses, many of which have expanded quickly during the epidemic as well-heeled city residents flock to them for everything from milk to medications.
On July 16, One97 Communications Ltd., the company behind the Paytm digital-finance app, submitted a prospectus for what would be India’s biggest IPO in terms of local currency. The company, which is funded by Jack Ma’s Chinese financial technology behemoth Ant Group Co, provides services such as a mobile wallet, loans, and stock trading. One97 intends to raise funds by issuing new and existing shares worth up to 166 billion rupees ($2.23 billion).
According to a company spokesperson, other businesses contemplating IPOs include digital payments platform One MobiKwik Systems Ltd., which submitted its prospectus earlier this month, and logistics and supply-chain services provider Delhivery Pvt. According to individuals familiar with their intentions, online cosmetics retailer Nykaa E-Retail Pvt., API Holdings Pvt., the parent company of online pharmacy PharmEasy, and PB Fintech Pvt., the parent company of insurance aggregator Policybazaar.com, are also contemplating listings.
“This is the first set of these companies coming to the public market” in India, said Kaustubh Kulkarni, the head of investment banking for India at the local unit of JPMorgan Chase & Co.
Given the businesses’ well-known brands, Mr. Kulkarni, who is also the bank’s co-head of investment banking for South and Southeast Asia, expects high demand for the shares. “Most of these businesses provide goods, services, or capabilities that hundreds of millions, if not billions, of consumers use on a daily basis,” he added.
Investors placed orders totaling 38 times the value of Zomato Ltd.’s shares, India’s equivalent to DoorDash Inc., last week. The food-delivery company collected approximately 94 billion rupees ($1.26 billion), and its stock is set to begin trading on July 27.
As more consumption moves online, some industry analysts believe Indian IT has lots of potential to expand. According to data company Venture Intelligence, early-stage investors have invested nearly $16 billion into Indian businesses this year, resulting in the creation of 16 new unicorns—young private firms valued at $1 billion or more.
According to Gaurav Singhal, director of India consumer technology at Bank of America Corp.’s investment banking arm, India’s unicorn population will grow to 150 by 2025, up from 60 currently. Many would ultimately want to float, resulting in a significant rise in market capitalisation, he said.
In the next five years, India’s internet ecosystem will generate $300 billion to $400 billion in market capitalization, according to Mr. Singhal.
Even as India registers more than 30,000 new Covid-19 cases each day, one of the highest daily numbers in the world, the transactions currently underway demonstrate how the country’s financial industry has been caught up in an international boom.
India has already seen a flurry of IPOs this year, following a worldwide trend driven in part by Asian tech firms like China’s Kuaishou Technology and South Korea’s Coupang Inc.
The Paytm digital-finance app’s operator has filed a prospectus for what would be India’s biggest IPO in terms of local currency.
Dhiraj Singh/Bloomberg News photo
According to Prime Database Group, a New Delhi-based research company, India’s 22 IPOs in the first half of 2021 raised $3.7 billion, a record half-year haul. Some freshly listed businesses’ shares are selling at double their initial public offering price.
At the same time, Indian stock indexes have soared as investors bet on big listed companies. The S&P BSE Sensex has hit a series of record highs, most recently on July 15, and international investors have poured about $7.7 billion into Indian shares this year, official data shows.
For the first time, millions of ordinary Indian investors are trading equities, following patterns observed in the United States and other markets.
Harpreet Singh, a 23-year-old from Pathankot in northern India, began dabbling in the market last year while waiting to study overseas.
Mr. Singh said that he had lost money following advice from videos on YouTube and Telegram, but that he still prefers trading stocks to obtaining a job in his hometown, where private-sector employment pays just 10,000 rupees a month, or about $134.
“If you know how to trade stocks,” he added, “you may make hundreds of thousands of rupees while sitting at home in three to four months.”
Shefali Anand can be reached at [email protected]
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