What happens when India’s first indigenous food delivery startup ends up with a valuation of nearly $14 Bn or over ₹1 lakh crore (as of July 23)?
Welcome to the new era of investing, where a potent blend of machine learning (ML) and big shots can bring mythical unicorns to life on the stock exchanges.
In a step towards India’s first unicorn public listing, Zomato – an Indian food delivery company – went public from 14-16 July 2021.
- Despite huge losses and average lucrative prospects, Zomato’s shares have zoomed around 90% over the issue price. That has driven the thought that similarly, revenue-challenged startups can expect an enthusiastic reception from investors.
- The work-from-home (WFH) concept and shutting down of dine-out joints have triggered more in-house ordering. As such, Zomato’s average order value (AOV) has surged 39% against its pre-Covid-19 levels as people are not only ordering from traditional quick-service restaurants (QSR) but also from high-end and premium chains.
- Zomato’s staggering performance on the bourses has fed the enthusiasm. Recently listed Indian stocks are surpassing the benchmark Nifty 50 Index by over 40% points in 2021, the biggest gap in 7 years.
- And what has followed is a flurry of IPO-aiming activity by the Indian startups – Policybazaar, Nykaa, and MobiKwik, among others. This list also includes India’s three most valuable startups – Paytm, Byju’s, and Flipkart.
- Paytm has filed its preliminary offering documents, aiming to raise Rs. 166 Bn ($2.2 Bn). If it hits that level, the IPO will be India’s biggest debut ever, beating by over Rs. 150 Bn rupees raised by the state-owned Coal India Ltd.
- Byju’s, which is valued at $16.5 Bn, is in early talks about an IPO.
- Flipkart is aiming for an IPO as soon as Q4 2021.
- The value of venture capital (VC) fundings in India clocked $7.9 Bn in July 2021, exceeding China for the first time on a month-by-month basis since 2013.
- Such kind of funding has helped India create a significant blessing of startups and unicorns worth at least $1 Bn.
- Furthermore, over 20% of startups that became unicorns in 2021 have already raised fresh funds at higher valuations since entering the multibillion-dollar club.
- Another half-a-dozen technology startups have filed for an IPO in India, and many others are planning to follow suit.
- During the first half of 2021, Indian startups raised $12.1 Bn from private equity firms and VC, eclipsing the previous calendar year’s total funding by $1 Bn.
- Last time we witnessed the mad rush for IPOs in 2007-2008, which raised a total of Rs. 51,084 crore over 137 issues. And within the eight months of 2021, Rs. 60,588 crore has been raised through 37 issues.
- This means over 118% of the value raised in 2007 and 2008 has already been raised via several issues, around 27%.
- IPO success stories will only increase the risk appetite as people will see that those risks have actually borne fruits. Moreover, this will promote more capital to pour as in 2020, $10 Bn was poured into the ecosystem throughout the whole year, and in 2021, it’s already more than $26 Bn.
We are likely to see hundreds of such IPOs through the coming decade. Moreover, many of India’s tech unicorns have immense growth prospects ahead of them.
Following Zomato, the startup environment will soon have a diverse range of case studies in the form of newer aspirants in the line to get listed. The explosion is for real, and it’ll assure that startups and their angel investors will shine brighter in the near future.
Indian public market investors have displayed that they do indeed value the role of growth and disruption. Furthermore, India’s political stability, macro fundamentals, and overall investment norms make it one of the better hubs for global investors.