IPO street: From Zomato to InMobi, 2021 could be the year of start-ups

Plans of companies such as Zomato, Policybazaar, Grofers and InMobi to launch an initial public offering (IPO) in 2021 could kick off a transition of successful start-ups from private to public capital.
 

The country has realised the potential of start-ups that have disrupted traditional businesses (or ways of doing business) and have garnered large market share, across segments. Recent IPOs by Route Mobile, Happiest Minds, and Burger King India saw huge oversubscription. Start-ups are, therefore, poised for an exciting two years ahead.
 

“We will see many large start-ups go for an IPO, especially those valued at less than $5 billion. India’s public markets have acquired the level of maturity and depth of coverage to support IPOs of this size. Beyond this, the IPOs would probably be better off in overseas markets,” says Anup Jain, managing partner of Orios Venture Partners.
 

IPOs aim to raise public money at an optimal valuation, and to get that right is mostly about timing and riding a positive equity market sentiment. “It’s a great time for financial investors in start-ups to get partial or full exits, and for companies to raise growth capital,” says Devangshu Dutta, CEO of Third Eyesight. Start-ups with global investors may prefer a foreign listing as they expect a bigger multiple on their investments. Various factors make an international listing more attractive, such as access to a larger pool of capital, sophisticated retail investors who can value loss-making businesses, and a global recognition and footprint.
 

“However, there a fear of foreign investors hijacking the wealth created by Indian start-ups, and the Securities and Exchange Board of India has announced new norms — such as easier migration to the main board, decreased holding period, and special rights — to make IPOs more lucrative in India. Consequently, many start-ups may opt for a dual listing,” says Ankur Bansal, co-founder and director, BlackSoil.

 

Policybazaar, which aims to go public by September 2021, has been eyeing a Nasdaq listing. “If we are allowed to, we will do it on Nasdaq; if not we will do it on the BSE,” Co-Founder and CEO Yashish Dahiya had said during an All India Management Association event. He is also open to a dual listing.
 

The SoftBank and Tiger Global-backed firm is targeting a valuation of $3.5 billion, and is looking to raise $250 million at a $2 billion-plus valuation before that.
 

Zomato, too, is eyeing a listing this year. “We have raised a lot of money, with our cash holding at $250 million,” Co-Founder and CEO Deepinder Goyal had said in a September email to employees. The firm reported a 100 per cent year-on-year surge in revenues to Rs 2,743 crore for FY20, though consolidated net loss also jumped 138 per cent to Rs 2,386 crore.
 

InMobi Group’s mobile advertising platform InMobi Marketing Cloud, which has reported profits since the last five years and is on course to achieve $1 billion in revenue, is also eyeing an IPO this year. It has a strong strategic collaboration with Microsoft, which could boost its prospects.
 

Businesses in the edtech, foodtech, healthtech, D2C, fintech, SaaS, logistics sectors have grown manifold in the aftermath of the pandemic.
 

“On top of this, the recent economic, stock market, and IPO market performance has been phenomenal. The overall impact has made start-ups consider bringing their IPO plans forward, to raise funds and provide an exit to private investors,” says Bansal.
 

Grofers is one such player to have advanced its IPO plan to 2021-end, as its profitability vaulted after the outbreak.
 

“The online grocery sector presents a lucrative opportunity for investment. That said, we are profitable and have a healthy balance sheet with enough capital to sustain the company for a long period,” Grofers Co-Founder and CEO Albinder Dhindsa had earlier told Business Standard. While the firm is still not part of the unicorn club, talks to raise up to $60 million are in final stages.
 

Delhivery, too, is targeting an IPO by mid-2022, while Flipkart, PhonePe, Zenoti, Mobikwik, Byju’s and Pepperfry are gearing up for an IPO in the next four years.