MC EXCLUSIVE Tech firms Zepto, PhonePe push ahead with IPO roadshows amid West Asia conflict, market volatility 

IPO

• Zepto and PhonePe meet foreign investors ahead of planned IPOs
• Both firms aim for IPO launches around May or June
• PhonePe has SEBI approval; Zepto awaits regulator nod

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Major Indian consumer-tech firms such as quick-commerce player Zepto and Walmart-owned fintech firm PhonePe have started engaging with foreign institutional investors as they seek to gauge investor demand for their respective IPOs, three people aware of the development told Moneycontrol.

The investor meetings come at a time when global and domestic stock markets are witnessing extreme volatility amid the ongoing conflict in West Asia that has led to the blocking of sea lanes vital for crude and gas transport and other commodities. The ongoing conflict has had ripple effects across several downstream sectors, raising fears of supply chain disruptions and higher inflation across global economies as well as India.

The two companies have already held meetings with foreign institutional investors across global financial hubs of Singapore, Hong Kong, UK and the USA and these conversations are expected to continue in the coming days, as the companies test the waters to gauge investor demand, sources said.

The sources added that these companies are planning to launch their IPOs around May or June, the sources said, adding that the timelines depend on the ongoing conflict in West Asia.

One of the people cited above said that Zepto is targeting its IPO launch in June.

“The company is going full steam ahead with its IPO plans and is looking at a June timeline for launching the deal. The reception from investors has been very good,” adding that Zepto has been growing faster than their peers, gaining market share from them and their growth has in fact accelerated in the last two quarters, which sets them apart from their listed peers.

A second person cited above, added that the Gulf-based investors form a small part of Indian IPOs, thus limiting the potential impact for large Indian IPOs like Zepto and PhonePe

“Apart from one or two sovereign wealth funds, there aren’t too many major investors from the Gulf who participate very heavily in Indian IPOs. Most investor meetings from the Gulf are usually managed over video calls these days. So the conflict does not have a major impact on demand for Indian IPOs. What will matter more is how long this conflict lasts and the impact it has on the global economy,” said one of the people cited above, adding that as of now investors are open to meeting companies.

The IPOs of PhonePe and Zepto are expected to be more than Rs 10,000 crore in size each. The final fundraising amount and timelines will however depend on the market conditions around the time of launch.

While PhonePe has received markets regulator Securities and Exchange Board of India approval for its IPO, Zepto is yet to receive the regulator’s approval.

Emails sent to PhonePe and Zepto did not elicit a response.

Falling markets, weak demand for IPOs

The Indian stock market is trading almost 11 percent down since the start of the calendar year. On March 12, the benchmark Sensex closed at 76,034.42, down 1.08 percent for the day.

The negative sentiment in the secondary markets is having a rub-off effect in the primary markets.

So far three companies have launched their IPOs since the war in West Asia started on February 28.

On March 12, manpower and toll plaza management services provider Innovision Ltd extended the closing date of its Rs 322.8 crore initial public offering to March 17 and reduced the price band, following a lukewarm response from investors.

Rajputana Stainless Limited, whose Rs 255 crore IPO closed on March 11, witnessed a subscription of just 1.12 times the shares on offer.

Earlier on March 6, Sedemac Mechatronics closed its Rs 1,087 crore with a subscription of 2.68 times.