Since the IPO boom of 2021, a dozen Indian startups have successfully listed on stock exchanges, marking a shift from chasing unicorn status to opting for public listings. This trend is underscored by the sharp drop in new unicorns—only two in 2024 compared to 47 in 2021—and a rise in IPOs for capital raising.
The report analyzes the performance of startup tech IPOs listed from 2021 onwards, highlighting market dynamics and early investor returns. Since 2021, 26 tech startups have entered the Indian public market, raising over Rs 64,000 crore, including Rs 30,600 crore from fresh share issuances and Rs 33,750 crore through offers for sale (OFS).
With private funding becoming more challenging, startups turn to IPOs for financial stability and new opportunities. IPOs create wealth for investors, benefit employees through stock options, and inspire other startups and entrepreneurs, attracting more investment and fostering innovation.
Following this trend, startups like Ola Electric, Avanse Financial, MobiKwik, Ullu Digital, FirstCry, and Unicommerce are set to enter the public market, further strengthening the Indian stock market.
Riding the Tech Wave: How Investors Have Fared in OFS? Market Trends: Gains, Declines, and Emerging Winners
The wave of tech IPOs in India has provided significant growth opportunities for investors, with many companies showing impressive returns. This report examines the performance of tech IPOs listed since 2021, focusing on market dynamics and early investor returns.
- Paytm: The Vijay Shekar Sharma led company was listed on November 18, 2021, with a 1.89x subscription rate and Rs 10,000 crore OFS, Paytm saw substantial gains for investors like Elevation Capital (10x returns). Initially listed at Rs 1,950, it currently trades around Rs 455.90 with a market cap of Rs 29,221 crore.
- Nykaa: The beauty and wellness e-commerce firm debuted in November 2021 with over 81x subscriptions and Rs 4,722 crore OFS. Early investors like Jeenoo Khakhar and JM Financial saw returns up to 178x. Currently trading at Rs 175.60, Nykaa has a market cap of Rs 50,614 crore.
- CarTrade: CarTrade was listed on August 20, 2021, with a 20x subscription rate and Rs 3,000 crore OFS. Early investors JP Morgan and Warburg Pincus saw returns up to 6x. The current share price is around Rs 830.
- PolicyBazaar: PB Fintech’s IPO was Rs 6,018 crore, with a 16.59x subscription. Softbank made 3.38x returns. Listed at Rs 1,150, it now trades at around Rs 1,400.10.
- Five Star: Fintech firm Five Star was undersubscribed at 70%, Five Star saw a 70% share price increase post-listing, trading at Rs 771.10.
- Digit Insurance: Recently listed Digit Insurance saw 9.6X subscriptions and currently trades around Rs 344.20 with a market cap of Rs 31,000 crore.
- MamaEarth: The Ghazal and Varun Alagh-founded company saw a 7.61X subscription rate, the company’s share price increased by nearly 40%, now trading at Rs 470, with a market cap of Rs 15,239 crore.
- Delhivery: The logistics firm was listed with a 1.63X subscription rate and Rs 5,235 crore IPO. Initially surged post-listing but currently trades around Rs 373.90.
Ixigo witnessed a high demand and strong returns when it went public. It is currently trading at around Rs 170.73. Awfis saw strong growth post-listing and current trades around Rs 646. While Zomato was oversubscribed 38.25X, MapMyIndia was subscribed 154.7X. Its current prices stand at around Rs 220.05 and Rs 2,277.50 respectively.
Gaming startup Nazara was listed at Rs 1,990 and is now sold at Rs 889 after a stock split. IdeaForge was subscribed over 100x, now trading at Rs 789. Tracxn, Zaggle, and Aether each saw varying subscription rates and returns, with current trading prices reflecting mixed performances.
The report takes a deep dive into other startup tech stocks like EaseMyTrip, RateGain, Fino Payments Bank, Veranda, DroneAcharya, TAC Security, and Yudiz.
FY24 Financial Highlights: Revenue Growth and the Rise of Profitability
In FY24, ten Indian tech companies reported revenues exceeding Rs 1,000 crore. Zomato led with a 71% increase to Rs 12,114 crore, turning a profit of Rs 351 crore from a previous loss of Rs 971 crore. Paytm’s revenue rose by 25% to Rs 9,977 crore, reducing its loss to Rs 1,422 crore from Rs 1,776 crore. Delhivery grew by 13% to Rs 8,142 crore, with losses decreasing to Rs 249 crore from Rs 1,008 crore.
Digit Insurance’s revenue surged 37% to Rs 7,096 crore, with profits soaring over 400% to Rs 182 crore. Nykaa’s revenue increased by 24% to Rs 6,386 crore, doubling its profit to Rs 40 crore. PolicyBazaar’s revenue grew by 34% to Rs 3,437 crore, shifting from a Rs 488 crore loss to a Rs 61 crore profit.
Five Star Business Finance saw a 43% revenue jump to Rs 2,183 crore, with profits rising to Rs 836 crore. MamaEarth’s revenue rose 29% to Rs 1,919 crore, swinging to a Rs 111 crore profit from a Rs 151 crore loss. TBO Tek’s revenue grew by 32% to Rs 1,393 crore, with profits up to Rs 201 crore. Nazara Technologies had a 4% revenue increase to Rs 1,138 crore, with profits up to Rs 75 crore.
RateGain’s revenue grew 69.35% to Rs 957 crore, with profits more than doubling to Rs 145 crore. Awfis increased revenue by 56% to Rs 849 crore, reducing its loss to Rs 18 crore. Zaggle’s revenue rose 40% to Rs 776 crore, with profits up to Rs 44 crore. Ixigo’s revenue grew 31% to Rs 656 crore, with profits more than doubling to Rs 73 crore.
While EaseMyTrip recorded a 32% revenue growth to Rs 591 crore, its profits decreased to Rs 103 crore. CarTrade’s 35% revenue increased to Rs 490 crore with profits of Rs 20 crore.
Aether recorded a revenue and profits dip to Rs 598.17 crore and Rs 82.49 crore. Yatra’s top scale spiked 11% to Rs 422 crore and slipped into a Rs 5 crore loss. MapMyIndia witnessed 35% revenue growth to Rs 379 crore while its profits went up to Rs 132 crore.
Veranda Learning’s revenue doubled but the company slipped into losses. While IdeaForge registered a massive 69% revenue increase to Rs 314 crore with profits up to Rs 45 crore, Fino Payments Bank saw a similar 58% revenue increase to Rs 150 crore with profits growing to Rs 86 crore.
Tracxn’s revenue grew a minimal 6% with profits widening to Rs 7 crore. Yudiz Solutions and TAC Security’s revenue remained flat. While Yudiz slipped into losses, TAC Security registered profits of Rs 6 crore.
Paytm, Delhivery, Awfis, Veranda, Yudiz, and Yatra reported losses in FY24. The performance of these companies highlights significant revenue growth and a varied transition between profits and losses.
Following the IPO Buzz: Upcoming IPOs
The Indian startup ecosystem is buzzing with a wave of companies gearing up for IPOs, marking a shift from the pursuit of unicorn status to public listings. The Bombay Stock Exchange (BSE) launched BSE Startups in December 2018 to help startups access equity funds, with operations beginning in August 2019.
Companies that have received SEBI approval and are set to announce their IPOs include EbixCash, Navi, Ola Electric, Portea, FirstCry, and Unicommerce. Meanwhile, firms like boAt, Capillary Technologies, Droom, and PayMate are preparing to refile their IPO papers after previously withdrawing.
Mobikwik, Ullu Digital, BlackBuck, and Avanse Financial have filed their Draft Red Herring Prospectus (DRHP) and await SEBI’s approval. Ather, Bira 91, Swiggy, SmartWorks, and Zappfresh have converted into public entities, setting the stage for their IPOs.
Several startups, including Adda247, BigBasket, Bluestone, CarDekho, Flipkart, Garuda, PayU, PhonePe, Pine Labs, Pristyn Care, Servify, The Good Glamm Group, InMobi, and Udaan, are planning their IPO strategies to capitalize on favorable market conditions. However, companies like Cars24, Ecom Express, Pepperfry, PharmEasy, Snapdeal, and OYO have opted out of IPO plans due to market uncertainties or internal reassessments.
Early-stage startups often prioritize scaling operations over profitability, focusing on revenue growth despite losses. This revenue is typically reinvested to expand operations and capture market share. The trend highlights a strategic shift within the startup landscape towards achieving profitability and long-term sustainability.
Navigating the IPO Era: The Challenges and Opportunities for Startups
Challenges for Startup IPOs:
- Market Conditions: Recent market corrections, global uncertainties, and poor IPO performances have made investors wary, especially of high-valuation, unprofitable startups.
- High Costs and Complexity: The IPO process in India is expensive and time-consuming, with stringent regulations.
- Lack of Dedicated Exchange: India lacks a specialized stock exchange for startups, like the US’s Nasdaq or China’s STAR Market. The BSE Startup platform has its own complexities.
- Stringent Listing Norms: Existing exchanges have strict requirements that may not suit growth-focused startups.
- Scrutiny and Accountability: Public listing subjects startups to increased scrutiny of their financials and operations.
Opportunities for Startup IPOs:
- Smaller IPOs with Strong Fundamentals: Investors favor smaller offerings from companies with good financials and realistic valuations.
- Demonstrating Profitability: Startups showcasing profitability and realistic valuations are more likely to attract investors.
- Large and Growing Market: India’s vast consumer base offers significant market opportunities.
- Valuation and Exit Opportunity: Public listing provides access to a wider investor pool, potentially leading to higher valuations and better exit options.
- Wealth Creation and Economic Growth: IPOs can create wealth for stakeholders and contribute to economic growth through job creation and tax revenue.
The IPO landscape for startups is challenging but offers opportunities. Startups can improve their chances of a successful IPO by emphasizing profitability, realistic valuations, and strong market fit. For Indian unicorns, navigating regulatory hurdles and showcasing a clear path to profitability are key to a successful public listing.
The IPO Process
- Securing an Underwriter: Investment banks are brought in to manage the IPO and bridge the company with investors.
- IPO Registration: The company prepares a detailed document (Red Herring Prospectus) outlining financials and risks, which must be approved by the registrar of companies and SEBI.
- SEBI Approval: SEBI reviews the prospectus to ensure full disclosure. Once approved, the IPO proceeds.
- Stock Exchange Application: The company applies to list its shares on a stock exchange.
- Generating Investor Interest: The company conducts roadshows to attract potential investors.
- Setting the IPO Price: The share price is set either through a fixed price or book-building process.
- Share Allocation: Shares are distributed to investors based on their bids. In case of oversubscription, allocation may be partial.
IPO Surge in India: Startups Prepare for IPOs Amid Economic Growth
In 2023, the BSE and NSE led globally in IPO numbers, with a 72% increase in Q4 compared to 2022. Despite a 12% drop in global IPOs and a 16% decline in proceeds in H1 2024, India saw a significant rise, accounting for 27% of global IPOs by volume, driven mainly by strong industrial sector activity.
India’s startup ecosystem is seeing a revival, with a focus on late-stage startups gearing up for IPOs. Startups are prioritizing performance and compliance to attract diverse investors. Despite many Indian startups showing weak bottom lines due to prioritizing growth over profits, IPO plans are not hindered by short-term losses, thanks to lenient regulatory requirements.
Of the 26 tech stocks analyzed, 76% are profitable, though only 21% of startups planning IPOs had profits in FY23. Fintech is leading both in existing tech listings and upcoming IPOs, followed by online travel aggregators, e-commerce, healthtech, proptech, and the used car marketplace.
TheKredible’s Take
The Indian startup ecosystem is shifting from unicorn mania to a focus on sustainable public offerings. This change is marked by fewer new unicorns and a rise in companies pursuing IPOs. Startups are increasingly prioritizing profitability, even though it’s not required for Indian IPOs, as they aim to attract a broader investor base and ensure long-term success.
Beyond profitability, many startups are demonstrating strong revenue growth and scaling effectively. Numerous companies are preparing for IPOs, with several having secured regulatory approval or filed their Draft Red Herring Prospectuses (DRHPs). This trend towards IPOs is expected to continue in the coming years.
Looking forward, the Indian startup scene remains dynamic. It will be interesting to see if the emphasis on profitability and IPOs persists and what new trends will emerge. The rising number of startups going public is a positive sign for the Indian economy, contributing to wealth creation, innovation, and sustainable growth.
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