When coupled with the potential to list in India, the start-up ecosystem, can pave the way for significant wealth generation as well as employment opportunities. It’s also offered modern investors additional choices, as they seem to be less eager in dividends and far keener in equities that feed their need for rapidly accumulating wealth.
The amount of people starting businesses has always been an indicator of a thriving economy, and India is seeing a same rise with the advent of new, innovative enterprises internet – based. These are also indicators of the huge opportunities for drawing multi-fold funding which will result in increased jobs, lifestyles, and efficiency, in addition to size, even to existing conventional enterprises.
As Covid-19 increased the need for rapid online deliveries of vital supplies, food and groceries, garments start-ups garnered significant investment in 2020. According to a study, India’s online start-ups leaders, which run businesses relating to e-commerce to food delivery and online insurance, are on the verge of going public, with a total amount of $180 billion by 2025.
According to Ajay Tyagi, chairman of the Securities and Exchange Board of India (SEBI), latest filings and public issues show the Indian markets’ maturity in adopting the business models of innovative tech firms, which cannot be valued using traditional profitability metrics.
He added, the success tales of such modern digital businesses’ initial public offerings would only draw additional capital in the domestic market that helps to develop a new ecosystem of investors and entrepreneurs.
Twenty-two start-ups have already achieved unicorn status in 2021. It is the ideal time for an Indian start-up company to obtain funds from the general public via initial public offerings (IPOs). The main objective of any start-up is to secure an Initial Public Offering (IPO). The floodgates for more cash and development in the start-up industry are opened by a successful IPO. With the exception of a few notable examples such as Indiamart and MakeMyTrip, most start-ups in India have failed to go public.
Zomato, Flipkart, Nykaa, Delhivery and Policybazaar are among the Indian start-ups preparing to be listed in domestic market. Ola, BigBasket, Pepperfry, Oyo, and Byjus’s are also among the companies looking at the market. This will allow these businesses to increase additional capital, offer investors with a piece of potential tech giants, give an easier exit path for venture capital funds that are invested in companies here, and create more venture capital investment for start-ups via the revenues they make.
A report said, “Although Amazon and Flipkart hold more than 80% of the market, the competitive environment is continually changing.” “For instance, Reliance Jio, including multiple vertical e-commerce companies and numerous brands which are already delivering straight to customers, is expected to appear as a substantial competitive challenge,” it added. “We think e-commerce logistics companies like Delhivery are a good investment.”
According to market players, the effective IPO will motivate venture fund and private equity firms to invest in additional domestic start-ups companies. It will also encourage other unicorns, or unlisted companies valued over $1 billion, to avoid the urge to list in the United States and make their international debut.
Businesses generated roughly Rs 4,600 crore via initial capital sales in FY21, over nearly twice the money raised in FY20 of Rs 2,140 crore, demonstrating the maturity of India’s IPO market, according to Tyagi. At the end of June in FY22, businesses had raised Rs 1,200 crore via IPOs.
Let’s explore who the major unicorn players are looking to list in the domestic market –
- Zomato
It is the largest online food delivery service, with over 2 million orders delivered every day. In India, it controls almost half of the market. The company’s sales increased by 105 percent in FY 2020 compared to the last year. The company earned $41 million during first quarter of financial year 2020-21, while losing $12 million.
- Policy Bazar
Throughout the first quarter of fiscal year 2020-21, the business earned $41 million despite losing $12 million. Yashish Dahiya, the start-up company’s co-founder, informed the press that the company expects to raise $250 million after a round of funding at a valuation of $2 billion prior to going public in September 2021. Started as a insurance platform, the start-up intends to go public, with a market capitalization of over $3.5 billion. According to Dahiya, the IPO will be worth $500 million. Policy Bazaar is planning to list in Mumbai, but Dahiya is willing to list in both countries.
- Nykaa
It is an Indian app-based start-up for fashion, beauty, and wellness products founded in 2012 by Falguni Nayar, a former MD of Kotak Mahindra Capital and a former student of IIM(Ahmedabad). Nykaa aims to sell up to 43 million shares for a total value of $5.3 billion. The company has received funds in several rounds. Fidelity Management, Lexdale International, and Stead View Capital are among its major investors.
- Flipkart
Walmart was rumoured to be contemplating an IPO for Indian e-commerce giant Flipkart in 2021 September, according to press reports. The CEO of Walmart also mentioned that, with Flipkart and its online payment subsidiary PhonePe both developing at a rapid pace, both firms have opportunity for more investors and might expand in a variety of ways, including through initial public offerings (IPOs). According to the estimate, Flipkart’s IPO might be worth more than $50 billion.
- Delhivery
India’s largest third-party online logistics provider. It has over 85 fulfilment centres and ships about 1 million parcels every day, with customers including e-commerce giants Amazon and Flipkart. According to sources, the business is likely to go public in the next 6-8 months, with a market capitalization of US$3.5-4 billion. The public offering is expected to garner between $400 million and $500 million.
The importance of these firms is clear to modern consumers who may frequently utilise the platforms and services of these internet start-ups to buy food, compare policies while purchasing insurance, mail parcels, or stay up to date with the latest fashion trends.
While we’ve all worked hard to make it easier for start-ups in India to list, this is also a chance for Indian exchanges to benefit from massive market capitalization, with hundreds of listed firms making a contribution to India’s wealth generation in the future.
References:
https://www.entrepreneur.com/article/363176
https://www.financialexpress.com/opinion/shaping-indias-start-up-ipo-story/2316971/
Article By:
Somasree Roy
Textile Value Chain
