Stock Markets | Flood of tech IPOs to hit Street after elections

Ola Electric Mobility last week said it has converted itself into a public company as it prepares for an IPO. (Mint)
Ola Electric Mobility last week said it has converted itself into a public company as it prepares for an IPO. (Mint)


At least nine new-age tech startups are readying offerings, preparing to tap the markets after next year’s general election

Investors are keenly awaiting five initial public offerings (IPOs) this week, including the much anticipated one of Tata Technologies Ltd. That, and those of the Indian Renewable Energy Development Agency, Fedbank Financial Services (Fedfina), Flair Writing Industries and Gandhar Oil Refinery are expected to raise over 7,300 crore collectively.

But a more interesting bunch of at least nine new-age tech startups is polishing its offerings, preparing to tap the markets after next year’s general election.

FirstCry, Lenskart, Swiggy, PayU, MobiKwik, Infra.Market, OfBusiness and PhonePe are among the new-age tech startups looking to raise over $2 billion in 2024 (around 16,600 crore at the current exchange rate), bankers and company executives said. The last time India saw a similar rush of tech-led startups to the market was in 2021, when Nazara Technologies, Zomato, Policybazaar and Nykaa sold shares in IPOs.

“On the supply side, there are several companies that are considering IPOs as a preferred route to give their investors an exit. On the demand side, the upcoming state elections’ verdict and the outcome of the general election will have an impact on overall market sentiment and, consequently, the primary market," said Pranav Haldea, managing director, Prime Database Group. In the past 25 years, the primary market has always been rather dull in the run-up to elections, Haldea added.

Most startups that got listed in 2021 have delivered operating profit with good visibility on PAT apart from showing prospect of profitability in the coming quarters, said Neha Agarwal, MD and Head of Equity Capital Markets, JM Financial Ltd. "Public market investors have finally recognized that these businesses can turn profitable. Ambiguity on the sustainability of their business models do not exist anymore and both domestic and foreign investors are open to evaluate opportunities to invest in those companies. In addition, clear focus on path to profitability has resulted in investors being able to ascribe profitability multiples to these companies instead of just resorting to sales multiples or very long-term DCF valuations previously," she said.

"Despite macroeconomic headwinds, rising interest rate environment and funding winter, Indian startups have been resilient so far and are looking to tap the public markets. After Mamaearth IPO's success, the first from India's startup ecosystem in the last 18 months, many companies are now looking to hit the public markets in the next 12-18 months," she added.

The results of state elections starting December will guide sentiment and might offer a peek into how the general election will pan out, experts said.

“There could be a small window before the general elections, which some of the companies that have already filed documents with Sebi (markets regulator Securities and Exchange Board of India) and secured approval will look to exploit," said the head of equity capital markets at a leading domestic investment bank, requesting anonymity.

Razorpay and Groww are working to change their domicile to India ahead of listing. Last week, Ola Electric Mobility said it has converted itself into a public company as it prepares for an IPO.

Ola Electric is trying to launch its IPO before March, a person aware of its plans said. “It is an aggressive timeline," one of the persons cited above said. The company has named Goldman Sachs and Kotak Mahindra Capital Co., among others, to manage the issue.

Ola Electric’s bankers are rushing to file the draft share sale papers by the end of this month, one person in the know said, adding that meeting the March deadline will be hard, and the IPO may happen only after the elections.

FirstCry and Swiggy, which have already appointed bankers, are likely to file draft papers in the first quarter of 2024. Oyo, which has already filed its documents twice, is yet to get a Sebi nod. OfBusiness, Infra.Market, Lenskart and PhonePe are yet to hire bankers.

“These companies are talking to bankers on prospective IPO plans but have not yet hired [them]," one of the persons quoted above said. “These companies have all worked towards stronger unit economics and turning in a profit, and they are strong IPO candidates."

PhonePe that has already domiciled in India back in December 2022 said it is in no hurry to list. "We haven't set any timelines for our IPO and we aren't in any hurry," the spokesperson said in an emailed response.

Companies take three to five months to prepare share sale papers, secure regulatory approval, conduct road shows and price IPOs. So, they need to start work in the first quarter of 2024 to be able to hit the markets when the elections are over.

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