The recent change in the law to allow Indian companies to list overseas first comes as a big boost to Indian startups, many of whom are loss-making and thus unable to list in India, and whose investors are looking for an exit- which an IPO will give them.
There are, however, other challenges. Whether the US stock markets will give these startups the valuation they want, is uncertain. Further, while IPOs are considered a sign of maturity and almost regarded as a badge of honour for startups, from the company’s point of view, staying private is a much better option, as it has to cater to fewer shareholders, regulation and disclosure norms are less exhaustive and regular share price fluctuation is not a concern. The decision will finally come down to internal objectives, whether investors need to cash out soon, and broader economic sentiment.
These are the startups which are considering an IPO in the next few years:
Flipkart: The Walmart-owned e-commerce firm has been eyeing a US IPO for a while now, according to reports, although it has no immediate funding shortage given its cash-rich parent and other investors. Mint reported on September 16 that the coronavirus pandemic has accelerated digitisation and online buying, from which Flipkart has gained. Due to this, it may go for an IPO as soon as next year, at a valuation of $40-45 billion, the report said, more than double the $21 billion for which Walmart acquired it in 2018. For FY19, Flipkart’s revenue grew 42 percent to Rs 43,515 crore, while it cut losses by 63 percent to Rs 17, 231 crore.
Freshworks: Software provider Freshworks raised $150 million in November last year, tripling its valuation to $3.5 billion, and according to reports and sources, this was supposed to be its last private round before a US NASDAQ IPO in 2021. However, the COVID-19 pandemic pushed these plans. But Freshworks is still one of the few profitable unicorns and with the US being its largest market, an IPO there could do well. In an interview with Moneycontrol in June, CEO Girish Mathrubootham said, “We are actively focusing on building the business, driving growth in new markets and strengthening our position in existing markets. We will aim for an IPO if and when a public offering proves opportune for the business.”
Policybazaar: Insurance aggregator Policybazaar is another startup closer to an IPO than many, given it is profitable, and still growing. Group CEO Yashish Dahiya wants to list in Mumbai next year, he told Bloomberg in June, but after the change in law, it may also go for a dual listing. Policybazaar wants to go public at a valuation of $3.5 billion, more than double the $1.5 billion it was valued at in July this year, when existing investor SoftBank invested $130 million for primary and secondary shares.
Zomato: Food delivery firm Zomato is a surprise candidate here, given that food delivery and eating out has been one of the worst-hit sectors from the pandemic. Even six months on, most players in the space have seen order volumes recover to only 50-60% of pre-pandemic levels. Despite this, on the back of a fundraising spree, Zomato CEO Deepinder Goyal told employees in an email that it is planning for an IPO in the first half of 2021. "Our finance/legal teams are working hard to take us to IPO sometime in the first half of next year. The value of our business is going up dramatically, all thanks to the hard work and commitment of our team. We hope to create a lot of value for our current employees who have Esops sometime in the next year,” Goyal said. For FY20, Zomato’s revenue doubled to $394 million, while losses rose about 5% to $293 million.
Nykaa: Online beauty and cosmetics retailer Nykaa has been a candidate for a domestic IPO for a few years now, given that it is profitable, and still growing. For FY19, its revenue doubled to Rs 1,159 crore and had a meagre profit of Rs 2 crore. The COVID-19 pandemic hit Nykaa for a few months, but CEO Falguni Nayar told the Economic Times in June that it would be at 75 percent of pre-pandemic levels by July and it plans for an IPO in the next 2 years. Nykaa also became a unicorn this year, and was valued at $1.2 billion in April
Delhivery: E-commerce logistics firm Delhivery was said to be preparing for an IPO in 2018, and had started reaching out to bankers, when it ended up raising money from the SoftBank Vision Fund instead and decided to stay private longer. Since then it has also raised funds from Canadian pension fund CPPIB, and is valued at $1.5 billion. Delhivery is now planning for an IPO in the next 12-18 months, Chief Business Officer Sandeep Barasia told Mint on September 16. With the law amended, it may choose to list abroad, and not in India. For FY19, Delhivery’s revenue grew 58 percent to Rs 1,694 crore while losses rose 160 percent to Rs 1,781 crore.
These are the most likely candidates for an IPO in the next few years. However, a slew of other startups including Lenskart, Pepperfry, Oyo, Paytm and Mobikwik has also spoken about listing ambitions in the past. It is unclear whether their plans have changed post the pandemic, or whether it is a priority above other things.
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