Indian tech IPO boom to be crucial test of investor appetite


The Zomato food delivery app has accelerated its stock market debut by Indian startups, hoping the crackdown on Chinese tech groups will draw the attention of global investors to Indian tech offerings.

$ 1.25 billion Zomato IPO Launched last week in Mumbai, the $ 2.2 billion list of Paytm, a payments and financial services app that has become a symbol of the craze surrounding India’s digitization, is expected to follow in the coming months. Paytm and Zomato are both backed by Chinese billionaire Jack Ma’s Ant Group, which has Japan’s SoftBank as an investor.

The IPO will come as investors grow increasingly bullish in India after Beijing has targeted the Chinese internet group. Diddy, a rideshare company, raised $ 4.4 billion in a New York IPO and was hit by a regulator days after sending in a large stake. Chinese tech stocks collapse..

Bankers said the listing in India marked the dawn of an era for US tech start-ups, which have money-intensive businesses that were previously funded only by individual investors. However, some analysts have raised concerns about the overheating Indian stock market and have warned that regulators may target this sector. On Friday, investor demand for Zomato’s IPO was 32 times greater than supply.

Ausang Shukla, Managing Director of Corporate Finance at brokerage firm Ambit, said:

“The founders of Zomato and the fierce competitors of Paytm want a successful IPO,” he added. “If they hit rock bottom, the whole industry will get a bad rap.”

Zomato and its rival Swiggy, two major players in food delivery, have epitomized the rapid growth of Indian tech start-ups. Both have spread to hundreds of cities with large discounts, and the blockade has trapped Indians in their homes, leading to an increase in orders during the Covid-19 pandemic. Nonetheless, Zomato reported a net loss of $ 100 million in the year through March.

After raising $ 3.6 billion this month, Zomato and Paytm could enter the open market with Flipkart, an e-commerce group competing with Amazon in India, backed by U.S. retailer Walmart. Valuation of $ 38 billion.. Insurance aggregator Policybazaar, beauty retailer Nykaa and logistics company Delhivery all show they will soon be listed.

Udhay Furtado, Co-Head of Asian Equity and Capital Markets at Citigroup, said: “There is clearly a global appetite…. Investors from all over the world, including those who have never been active in the local Indian market.

Zomato’s IPO is expected to give a valuation of $ 8 billion, and Paytm has a market cap of $ 25 billion, making it one of the top 25 companies in India.

Neha Singh, founder of Bangalore data provider Tracxn, said the two companies’ losses had not deterred investors. “In India, you were expected to make a profit before getting listed. That has changed, ”Shin said. “The market is the best ever and people want to take advantage of it. “

This list is consistent with Indian companies rushing to open government procurement, despite the economic struggle after the brutal second wave of coronavirus. According to data from Refinitiv, 37 companies listed in India in the first half of 2021 raised $ 3.9 billion, the highest since the global financial crisis. The benchmark Nifty50 index rose 13% this year to an all-time high.

For Zomato, investors want the company to be India’s answer to Meituan, China’s largest food delivery platform, which went dark in 2019. Paytm has established itself as a super potential application to become Alipay in India, an online supermarket for the financial bank of the Ant group. services.

Like its peers, Zomato has gained market share in India’s large informal economy as the blockade has expanded its business online. But analysts are wondering if the boom will continue.

Jeffreys said whether food delivery to India could be sustainable in the long term, given that orders remain much lower than in China and the United States, “from major investors.” Concerns. “There are lots of questions on the minds of investors… The FOMO factor should keep the excitement level high, ”the investment bank wrote.

Regulatory uncertainty is a risk for India as the government has introduced legislation to give more control over the data of 1.4 billion people, as in China.

“Indian regulators have taken a somewhat fanciful view of the role of technology in the financial sector, especially when dealing with foreign players,” said Zennon Kapron, director of Kapronasia, a regional financial technology consultancy. . Declared.

If Zomato and other startups try to enter the market, they will want investors to give them questionable profits.

Samir Arora, Founder of Helios Capital Investment Group, said, “Zomato is unique and Indians love what is unique in the market,” he added. “It’s in the red, but it’s not obscene.”

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