The boom in new-age technology IPOs in India risks coming to a stop as several new startup listings continued their downward spiral soon after making their market debuts, a report by Bloomberg stated.
While, Zomato fell 55 percent from its record high level of ₹169.10 hit on November 16, 2021, Paytm has lost 57 percent from its all-time high of ₹1,961.05, hit on November 18, 2021. Nykaa has also declined 41 percent from its record high.
A raft of prominent tech startups, including Oyo Hotels and logistics provider Delhivery, are pushing back their public debuts and preparing to reappraise target valuations on the back of such decline in startup stocks, the report added.
"India’s burgeoning startup ecosystem faces a reckoning just weeks after it closed out a record year for IPOs. Investors have soured on new tech offerings after the calamitous public debut of fintech firm Paytm, as well as the battering received by newly listed e-commerce operators Zomato Ltd. and Nykaa. Regulators have stepped up scrutiny of IPO candidates after investors got burned, contributing to the delays," explained the report.
"Investors are no longer enamored of the household name startups; they want a path to profitability and returns, not hype and hoopla,” the report quoted Anup Jain, a managing partner at early-stage investor Orios Venture Partners.
Promoters of startup Delhivery have pushed back its approximately $1 billion IPO to FY23. It is also reviewing its listing plan after the stock market regulator frowned on a planned sale of a substantial amount of shares by investors in the IPO, noted Bloomberg.
Meanwhile, Oyo, which came under scrutiny for its ownership structure and heavy losses after filing preliminary IPO documents last year, is also now facing regulatory questions too, it added. Oyo is under ongoing litigation with hostel operator Zostel which claims to have a 7 percent stake in the company after a failed merger in 2016.
The approval for the draft prospectus of Oyo’s planned $1.2 billion IPO has been pending for almost five months, the report added.
"Paytm’s parent company, One 97 Communications raised a record $2.5 billion when it went public in November. But its shares have plummeted 60 percent from their IPO price, infuriating investors and fueling concerns among regulators. A broader decline in tech stocks in India and beyond has only added to the gloom," Bloomberg stated.
Further, the fate of the massive public share sale of state-owned Life Insurance Corporation is also hanging over the upcoming listings. LIC filed its draft red herring prospectus on February 13, 2022, to sell 5 percent stake in the public sector firm via the IPO.
The IPO of the insurance major is likely to be launched before March-end, in this current financial year. It is expected to help the government of India meet its revised disinvestment target of ₹78,000 crore FY22. The DHRP, however, does not indicate the offer size of the IPO.
"The final valuation and investor interest in what’s being called the 'mother of all Indian IPOs' could dictate the course of technology companies’ listing plans," added Bloomberg.
LIC is one of the largest corporations in India, so its IPO launch would be the largest public offering ever in the history of the Indian financial markets.
