The Mumbai-based D2C electronics brand boAt, operating under its parent company Imagine Marketing Ltd., has withdrawn its listing plans citing market conditions being “choppy”. The company had earlier filed its Draft Red Herring Prospectus (DRHP) with the SEBI on 26th January 2022 in order to raise around ₹2000 cr through an IPO (Initial Public Offering).
Instead of the IPO plan, the company has chosen to raise a capital of ₹500 cr from its existing shareholder, an affiliate of Warburg Pincus (a global private equity fund) and a new investor Malabar Investments, via preference shares through a private placement.
It seems that boAt wants to make smartwatches its second flagship product after audio products. BoAt’s co-founder and Chief Marketing Officer, Aman Gupta says, “We now want to make smartwatches our second core and will replicate the boAt digital playbook to become global leaders in this category as well”. This is part of the larger initiative of shifting the company’s focus from audio devices to wearables.
There are also further expansion plans lined up in terms of increasing the company’s local manufacturing and R&D capacity in India – boAt has already invested efforts in making its own in-house boAt lab. There are also plans for scaling up the channels in India and abroad.
Finally, IPO plans have only been delayed, not rejected. The company does plan on going through with the IPO, but after 12-18 months.
BoAt IPO withdrawal is not an event happening in isolation. Other companies such as Udaan, Mobikwik, Droom and Pharmeasy have also postponed their IPO plans. While Pharmeasy is going for a rights issue, Mobikwik is also looking at other sources to raise capital via equity. There are some companies which have SEBI’s observations valid for a few weeks more but are yet to announce their IPO.
Reasons for such measures include fear of low valuation due to conditions of the company or market sentiments or just general change in financial strategy. Quite a few new-age Indian tech startups have not seen a good run in the open market – Zomato and Paytm have seen their stocks plummet post-IPO, thus sending a negative signal to others. Many companies going through with the IPOs are seeing a high OFS rate (i.e. existing shareholders dumping their shares) which does not help inspire confidence among retail investors. One could blame recurring mistakes such as financial mismanagement, excessive cash-burning and errors in valuation as a part of the problem with such startup IPOs.The post-COVID resilience in the Indian market may have taken a hit.
In fact, companies across the world are seeing a drop in the IPO value due to economic factors such as tapering of quantitative easing by the US Fed and ECB, market volatility, Ukraine-Russia conflict and high inflation. Therefore, companies across the world, who are adamant on their valuations are choosing to postpone their IPOs for better times.
While some IPOs, like the boAt IPO, are getting withdrawn, there are many more that are sticking around. Companies with strong financials are going to make progress and attract investors. Therefore, if you are interested in investing in an IPO, try searching for a list of upcoming IPOs that you can invest in. If you do not have a demat account, you can easily open one today.
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