Zomato IPO’s success sets off a listing frenzy

India may see fund-raising via IPOs hit all-time high

The market for initial public offerings in India is turning into a feeding frenzy.

The amount of money raised in IPOs this year has reached $8.8 billion, already surpassing the totals of the past three years though it’s only August. At the current pace, 2021 would exceed the all-time record of $11.8 billion. Founders, bankers, lawyers and advisers are racing to cash in on fervent demand for fresh public offerings.

The catalyst, in a word, is Zomato Ltd. The fooddelivery startup went public in July and, despite deep losses and mediocre prospects for profitability, shares have soared more than 70 per cent. That has fueled the idea that similarly profit-challenged startups could find a strong reception from investors.

Oyo Hotels & Homes Pvt, a long-troubled lodging giant, started work last week on its draft prospectus and aims to file in October, according to people familiar with the matter. The ride-hailing leader Ola and fintech startup Pine Labs have also begun talks with investment bankers, according to other people aware of the situation.

“India is definitely the star of the show — that is the new phenomenon,” said Udhay Furtado, cohead of Asia equity capital markets at Citigroup Inc., the lead foreign bank in Asia IPO league tables so far this year. “Zomato really opened people’s eyes to India and now we have all these privately funded unicorns coming to the public market.”

The performance of recent IPOs, such as Zomato, has fed the enthusiasm. Newly listed Indian stocks are beating the benchmark Nifty 50 Index by more than 40 percentage points this year, the biggest gap in seven years.

The country’s three most valuable startups are all considering or planning IPOs. Paytm, the country’s leader in digital payments, filed its preliminary offering documents, aiming to raise as much as `16,600 crore ($2.2 billion). If it reaches that level, the IPO would be the country’s largest debut ever, eclipsing the more than `15,000 crore raised by state-owned Coal India.

Flipkart, the Indian ecommerce giant controlled by Walmart Inc., is aiming for an IPO as soon as the fourth quarter, Bloomberg News has reported. Byju’s, a digital education startup valued at $16.5 billion, is in early discussions about an IPO and bankers are encouraging the company to take advantage of the red-hot market, according to people familiar with the matter. Byju’s is in the midst of absorbing several substantial acquisitions and is likely to hold off on any listing for at least a year.

Such is the hysteria that PhonePe, a payments startup Walmart acquired as part of its Flipkart deal, is considering shifting its incorporation back to India from Singapore to capture local investor atte-ntion, according to two people familiar with the matter who did not want to be identified. The regulatory upheaval in China has also sent investors looking for promising opportunities in countries with more predictable government policies.

“If global investors have to pick an emerging market, the balance is tilting in India’s favour after the regulatory action in the China internet ecosystem,” said Pankaj Naik, executive director and cohead, digital & technology at consultancy, Avendus Capital Pvt. “India may not be as attractive as China in the broader economic sense but it’s looking like a safer bet.”

Oyo Hotels, PhonePe and Pine Labs did not respond to emails seeking comment.

India’s success with startups has long lagged beyond that of the US or China. But this year has been something of a breakout. Investors have pumped money into India, while China’s crac-kdown on private enterprise has spooked financiers. The value of venture investments in India reached $7.9 billion in July, surpassing China for the first time on a monthly basis since 2013, according to Preqin.