In the last part we discussed how the year 2021 has nurtured a significant number of IPOs for the start-ups. These IPOs have significantly boosted the financials of the start-ups and infused the required capital for the start-ups to expand. In this part we shall discuss as to how such process of IPO shall benefit the start-up culture and India and what future does it hold for the start-up industry.
Reason behind the IPO rush
- The perception of a significant desire for investing in India’s IT enterprises among global institutional investors is one of the main reasons for Indian companies going public.
- Further overseas investors are interested in investing in Indian firms through both public and private offers.
- Companies are also aiming to take advantage of buoyant stock markets in anticipation of a successful recovery from the epidemic in order to raise adequate funding for longer-term development plans, preferring IPOs to further investments from current shareholders.
Advantages of IPOs for start-ups
- Conducting an initial public offering (IPO) has the potential to grow a company exponentially, infusing it with much-needed cash to fund operations and future growth. Such money can be life-changing for a start-up and its founders after years of sacrifice and hard work.
- The funds can be used to hire new employees, build new facilities, reduce debt, fund capital expenditure, acquire new technology or other companies, or to finance research and development.
- Beyond infusing cash, an IPO puts a company in the public spotlight, multiplying its business potential.
- The higher profile that an IPO offers in turn gives companies the intangible asset of credibility, which presents access to new opportunities that range from high-value business partnerships to the ability to attract and retain talented employees and beyond.
SEBI (Securities and Exchange Board of India) has eased a number of regulations to make it simpler for startups to list on Indian markets. SEBI decreased the time that early-stage investors must retain 25% of the pre-issue capital from two years to one year earlier in 2021. SEBI also changed laws that previously prohibited startups from making discretionary allotments, allowing companies to assign up to 60% of the IPO issue size to a qualified investor, subject to a 30-day lock-in period on such shares.
Prospective IPOs in the year 2022
In hindsight, the year 2021 will be recognized as a watershed moment in the Indian start-up ecosystem, as well as the urge among new-age enterprises to ditch their private brands and go public. 2021 opened up a whole new route for investments, not just for start-ups, but also for the public markets and the millions of ordinary investors. Following are some of the Start-ups heading for an IPO this year.
- The Gurugram-based logistics start-up filed a draft red herring prospectus (DRHP) in November to raise INR 7,460 crore.
- The application is now being processed, according to the SEBI website. The initial public offering (IPO) is planned to launch in the first quarter of 2022, with a valuation of $4.5 billion to $5 billion.
- Online travel ticket aggregator Le Travenues Technology, which operates ixigo, has filed a DRHP with SEBI to raise INR 1,600 crore through an IPO.
- The IPO will have two parts: a primary offering of new shares worth INR 750 crore and a secondary offering of existing investors’ shares worth INR 850 crore.
- The regulator has yet to approve the Gurugram-based travel platform’s IPO. The offer is expected to become live in the first quarter of 2022.
On October 1, Oravel Stays, the parent company of hospitality unicorn OYO, filed for an initial public offering (IPO) worth INR 8,430 crores, which will include new shares worth INR 7,000 crores and an offer for sale in which existing investors are expected to offload their shares worth INR 1,430 crores.
- Droom, an online vehicle marketplace, submitted a draft prospectus to earn INR 3,000 crore through an initial public offering (IPO) last month. A fresh issue of shares worth up to INR 2,000 crore and an offer for sale worth INR 1,000 crore are included in the IPO offer.
- It has not yet acquired SEBI permission, but is anticipated to do so and go public between January and March 2022.
- Even after gaining the SEBI approval on October 7, the IPO of One MobiKwik Systems, the parent company of Delhi NCR-based MobiKwik, has been postponed. The first public offering was scheduled to begin around Diwali 2021.
- The INR 1,900 crore IPO consists of a new issue of equity shares worth up to INR 1,500 crore and a sale of existing shares worth up to INR 400 crore to existing shareholders.
- In the first quarter of 2022, the company is anticipated to go public.
- API Holdings, the parent company of epharmacy unicorn PharmEasy, filed a DRHP with market regulator SEBI in November 2021, hoping to raise up to INR 6,250 crore through a new share issue.
- The DRHP, which was submitted on November 10th, is now being processed by the capital market regulator, with an IPO scheduled for the first quarter of 2022.
- BYJU’s, an edtech behemoth founded in 2012, is also planning a domestic initial public offering in 2022.
- In November, the country’s most valuable edtech unicorn boosted the amount of its current Series F round to INR 2,700 Cr ($363 Mn) at a $21 Bn valuation.
- In the second quarter of 2022, byjus is set to go public.
Apart from these, companies like Udaan, PhonePe, BigBasket, Cars 24, The Good Glamm, CSS Corp, Urban Company and more are also in the pipeline to go the IPO route in 2023. It can be inferred from the above perspective IPOs that start-ups are now moving forward towards securing investment while going public. Such conduct is expected bring about new changes in the start-up ecosystem along with the advent of newer innovations and technologies, which were earlier not possible due to the lack of capital.