All eyes on Buffett, Son India stakes as Rs 1.15-trillion lock-ups end

India’s fledgling technology sector faces a key test this month as lock-up periods on Rs 1.15 trillion worth of shares sold in initial public offerings (IPOs) expire, allowing billionaire backers including Warren Buffett and Masayoshi Son to sell.

Lock-ups end in November for four consumer-focused tech stocks, which have all slumped in the past month. These include One 97 Communications — operator of payments service Paytm — and FSN E-Commerce Ventures, owner of beauty e-retailer Nykaa.
 

While high-profile tech IPOs have met with strong demand from the growing herd of retail investors, market pros have been more neutral on the stocks.

“Investors have become more demanding when it comes to expectations of future profitability from these businesses,” Tom Masi and Nuno Fernandes, co-portfolio managers at GW&K Investment Management LLC, said in an email. 

The country’s market for first time share sales boomed in 2021, raising a record $18 billion in proceeds amid high demand for tech issues in the low-rate early days of reopening after the pandemic.

Overall offerings have slowed this year amid slumping tech stock prices, increasing rates and recession fears.

Paytm has lost the most among the recent tech debutants, now down 70 per cent since its IPO, which was backed by global investors including Son’s SoftBank Group, Buffett’s Berkshire Hathaway and Jack Ma’s Ant Group. The stock may face additional pressure after November 15, when about $4.3 billion worth of shares is unlocked.

“There is a possibility that Softbank could take some profit since it was an early investor (in Paytm, Delhivery and PolicyBazaar owner PB Fintech)”, said Brian Freitas, an analyst who publishes on Smartkarma. Softbank has been selling down stakes in investments to fund its ongoing multibillion-dollar share buybacks, he added.