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‘FY22 will see tech IPOs lead primary markets’

S. Ramesh (left), managing director and chief executive officer of Kotak Mahindra Capital Co., and Sourav Mallik, the firm’s joint managing director.Premium
S. Ramesh (left), managing director and chief executive officer of Kotak Mahindra Capital Co., and Sourav Mallik, the firm’s joint managing director.

S. Ramesh, managing director and chief executive officer of Kotak Mahindra Capital Co., and Sourav Mallik, the company’s joint managing director, talks about outlook for primary markets in fiscal year 2021-22 (FY22), and why tech IPOs will lead the activity this year

The stellar listing of Zomato Ltd has created a strong buzz around tech initial public offerings (IPOs). In a conversation with Mint, S. Ramesh, managing director and chief executive officer of Kotak Mahindra Capital Co., and Sourav Mallik, the company’s joint managing director, talk about the outlook for primary markets in fiscal year 2021-22 (FY22), and why tech IPOs will lead the activity this year. Edited excerpts:

Has the successful Zomato IPO made an Indian IPO the de-facto option for most local tech companies?

Ramesh: From our (Kotak Mahindra Capital Co.) point of view, we never had any concern as many of these businesses are Indian businesses and there is no better place to list than in India. We were confident that they would get excellent valuations and response. The business case was there for them to list in India.

Also, we recognized that a small number of such companies may have a business presence outside and have further plans to build a global business. Such companies may end up listing outside India. Having said that, most of the new-age tech companies are likely to get listed in India. Global and local investors seem to have a good appetite to invest in such companies.

Mallik: If you look back to the listing of Maruti Suzuki in the Indian market in June 2003 and the kind of visibility a consumer-oriented company such as Maruti got from getting listed, it makes perfect commercial sense for new-age companies to get listed in India.

Ramesh: Last year 2.17 trillion was raised from the primary market, led by qualified institutional placements (QIPs) and IPOs. FY22 in all probability will see a larger fundraise from the primary market, led by the tech IPOs.

What role has market regulator Securities and Exchange Board of India (Sebi) played in easing the path to IPO for these tech companies?

Ramesh: Sebi as a regulator has been progressive and supportive for the listing of these new-age tech companies in the country. Earlier there was speculation that these tech companies may get exported to the global markets for listing. The Zomato listing and a pipeline of other tech companies have put such speculation to rest. All of this would not have been possible without the proactive support of Sebi.

Kotak has bagged many of the high-profile tech IPO mandates. Is this a strategic direction for the firm to focus more on tech deals in not just capital markets, but also in the private fundraising market?

Ramesh: Last year, we expanded our team and started a more focused digital practice. Coincidentally, we also had a strong pipeline of private placement and merger and acquisition (M&A) transactions. Over time, we have put in effort towards understanding these new-age companies and also the investors’ appetite for such companies.

With tech companies getting greater pools of capital, we will see a pick-up in merger and acquisition (M&A) activity. This could include omnichannel acquisitions. This will also fast-track such companies to the IPO market.

Our strategy will be to continue identifying young founders who will foray into the start-up space.

The Thyrocare acquisition by PharmEasy and the Aakash acquisition by Byju’s point to a growing trend of omnichannel-focused acquisitions by leading startups. What is your view on this?

Mallik: We think this is a dominant trend that is here to stay. Most companies have come to the conclusion that India will have to be tackled on multiple fronts and distribution is not going to be either one or the other but is going to be a combination. Whether it is the tech company acquiring the offline company, or the offline companies acquiring the tech companies, it does not matter who acquires whom. The point is that these synergies exist.

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