A boom in technology initial public offerings in India risks grinding to a halt after several of the country’s highest-profile startups tanked soon after listing.
A hoard of eminent tech startups, including OYO Hotels and e-commerce logistics firm Delhivery, are deferring their IPO (Initial Public Offering) by a few weeks amid a highly volatile market and gearing up for rejigging valuations, according to people privy to the source. Both, backed by SoftBank Group Corp., had been among the country’s highly anticipated offerings. As per the Draft Red Herring Prospectus (DRHP), Delhivery’s IPO comprises fresh issuance of equity shares worth INR 5,000 crore and an offer for sale (OFS) component of INR 2,460 crore by existing shareholders. The existing shareholders are expected to dilute a part of their holdings.
“Even, merchant bankers have advised Delhivery against it and suggested it wait for a month or two due to the volatility of the market. They also want to avoid a face-off with the LIC IPO, which is expected in the first week of March,” one of the persons cited above said.
The owners of Delhivery have deferred its approximately $1 billion IPO to the next fiscal year starting in April, said some of the people, wishing to remain anonymous, because of the sensitivity attached to the details. Delhivery is also reviewing its listing plan after the stock market regulator frowned on a planned sale of a substantial number of shares by investors in the IPO, the people said. The logistics startup, backed by Carlyle Group Inc. as well as SoftBank, had previously planned to list by March.
The listing of LIC is poised to be India’s biggest IPO to date, with the government looking to fetch up to INR 1 lakh crore by selling its shares. LIC listing, considered to be the mother of all IPOs, is going to be five times bigger than that of Paytm; it has raised INR 18,500 crore in November last year.
India’s maiden tech IPO rush didn’t augur well for the start-up ecosystem and caused a monumental exodus of global investors in 2021. Paytm’s parent company, One97 Communications Ltd., garnered a whopping $2.5 billion after going public. But its shares have slumped to a staggering 60% from their IPO price, fueling further concerns and raising heckles among investors. A major downfall in tech stocks has made the environment jittery.
Having faced this rude awaking, the startup ecosystem has received a big jolt. Investors seem to have fallen out of love with new tech offerings after the unsavoury public debut of Paytm, as well as the hammering received by newly listed e-commerce operators Zomato Ltd. and Nykaa. This turn of events has forced regulators to step up the scrutiny of IPO candidates and soothe the frayed nerves of investors, leading to delays.
Considering the beating that loss-making tech and internet companies have taken in the current market, investors apparently wouldn’t want to list with a downside.
“Household name startups don’t tickle investors’ fancy anymore; profitability and returns are what they ask for, not hype and hoopla,” said Anup Jain, a managing partner at early-stage investor Orios Venture Partners.
OYO, which came under fire for its ownership structure and huge losses after filing preliminary IPO documents last year, is now being grilled by regulator. It has even dug deeper into OYO’s ongoing litigation with hostel operator Zostel Hospitality Pvt., which is asking for a pie in the company after a failed merger in 2016.
Citing scrutiny as standard procedure, an OYO spokesperson said, “Regulators ask for clarifications of a preliminary IPO filing, adding “our bankers are actively engaged with them. We can’t comment on specifics.” Delhivery declined to respond.
The momentum of new-age companies was encouraging people to invest, speculate and make money. But that bubble is now visibly burst. However, industry pundits are of the view that it is a good decision, as it will give the logistics major more time to improve its financials and sharpen its pitch to public-market investors.