Initial public offerings (IPOs) such as Zomato demonstrate the robustness of the Indian market: SEBI Chairman

An Overview

In the wake of several concerns raised about Zomato’s successful IPO, SEBI Chairman Ajay Tyagi said on Thursday that recent public offerings demonstrate the maturity of the Indian market, which is accepting the business model of new age tech companies, which may not be valued using traditional profitability metrics.

He noted that successful IPOs of such companies will likely draw additional capital in domestic markets, establishing a new ecosystem of entrepreneurs and investors, while speaking at NISM’s Second Annual Capital Markets Conference.

“Recent filings and public offerings reflect the maturity of our market to accept the business model of new age tech companies, which aren’t amenable to valuation through conventional metrics of profitability,” he said, adding that along with robust growth, it is heartening to note that Indian markets are entering a new era with several new age tech companies preferring to list domestically.

Tyagi believes that domestic markets are just as appealing as international markets for raising capital. His remarks come at a time when various concerns have been raised regarding the public offerings of new age companies that have yet to achieve profitability but are valued at high levels.

Further Key Takeaways

By the end of the final day of the issue on Friday, Zomato’s much-anticipated initial public offering (IPO) had been subscribed over 38 times. It will be launched on the BSE and NSE on Monday at a premium of Rs. 76. PayTM, a tech-based new age company, has filed for an initial public offering (IPO) with a target valuation of Rs. 16,600 crores.

The maturity of the Indian IPO market, as well as its resilience to the pandemic, is evident in the amount of money generated in FY 21: firms raised Rs. 4,600 crores in IPOs, compared to Rs. 2,140 crores in FY20, according to Tyagi. Companies have already raised Rs. 1,200 crores in FY 22 until June end, and based on the number of fresh SEBI filings, the statistics are projected to rise significantly in the future, he noted.

The capital market regulator chief stated that current low interest rates and sufficient cash flow accessibility are not the only reasons for increased investor interest in India’s financial market, though they are important considerations, and any narrowing of cash flow or interest rate hike would have an effect on the market.

“However, it must be recognised that, by their very nature, markets are forward-looking, and current investments take future growth potential into account. Add to that the regulator’s ongoing discussion with stakeholders in order to implement required regulatory changes, streamline operations, and retain market trust.”

A Tech IPO Surge is Heading Towards the Nation

As entrepreneurs want to harness a stock market that has shown resilience despite pandemic, India is gearing up for tech IPOs, including two worth more than $1 billion.

According to various bankers, the initial public offerings represent the maturation of a generation of e-commerce and digital-economy companies, many of which have developed swiftly during the pandemic as well-heeled city inhabitants flock to them for everything from milk to pharmaceuticals.

On July 16, One97 Communications Ltd., the company behind the Paytm digital-finance app, submitted a prospectus for what would be India’s largest IPO in terms of local currency. The company, which is backed by Jack Ma’s Chinese financial technology giant Ant Group Co, provides services such as a mobile wallet, loans, and stock trading. One97 intends to raise funds by issuing new and existing shares worth up to 166 billion rupees ($2.23 billion).

Other firms planning IPOs include digital payments platform One MobiKwik Systems Ltd., which submitted its prospectus earlier this month, and logistics and supply-chain services provider Delhivery Pvt. Nykaa E-Retail Pvt., API Holdings Pvt., the parent company of online pharmacy PharmEasy, and PB Fintech Pvt., the parent firm of insurance aggregator Policybazaar.com, are all thinking about going public.