Global investors’ attention will be focused on India’s stock market in the coming weeks, as two startups, both of which are unicorns, are scheduled to go public.
Zomato, a restaurant aggregator and food delivery venture, will launch its initial public offering on July 14. The company is seeking to raise 93.75 billion rupees (approximately $1.25 billion) through a new share offering and a tender offer from its parent company.
Zomato’s public offering comprises 90 billion rupees worth of new shares and 3.75 billion rupees worth of shares acquired through an offer for sale by its parent company Info Edge. Zomato’s shares will be priced between 72 and 76 rupees, according to information available on the BSE stock exchange.
Info Edge, which owns an 18.6 percent stake in the food delivery company, was founded by Indian internet entrepreneur Sanjeev Bikhchandani, who currently has a net worth of $3.1 billion according to the Real-Time Billionaires ranking.
According to Venture Intelligence, which tracks private company financials, Zomato’s other investors include Uber B.V., Alipay Singapore, Antfin Singapore, Tiger Global, Sequoia Capital, D1 Capital Partners, Temasek, Kora Management, VY Capital, and Glade Brook Capital.
Paytm, a mobile payments and commerce platform, is next in line to seek shareholder approval for a public listing of its shares and finalize the issue’s details. The company’s board of directors was recently restructured. It intends to raise approximately 166 billion rupees ($2.23 billion) through an initial public offering.
Vijay Shekhar Sharma, who currently has a net worth of $2.3 billion, founded Paytm. Alibaba, SoftBank, SAIF (now Elevation Capital), Berkshire Hathaway, T Rowe Price, and MediaTek are among the fintech firm’s investors.
Although neither company has yet to achieve profitability, the listings provide an opportunity for some existing investors to sell a portion or all of their stake. Additionally, it provides an opportunity for employees who acquired stock options at a discount to sell their shares and profit.
While the Indian public markets have seen the successful listing of a few pure play internet and mobile companies, these companies—which include Info Edge, Matrimony, JustDial, and IndiaMART—are mature ventures (from the 2000 era) with a track record of profitability, according to Arun Natarajan, Founder, Venture Intelligence, which tracks private company financials. The response of Indian institutional investors to Zomato and Paytm’s initial public offerings (IPOs), given their massive losses (along with hypergrowth), will be interesting to watch and likely critical for other B2C online services companies lining up for domestic IPOs, he adds.
The journey from concept to initial public offering is becoming increasingly rapid, according to Mohit Bhatnagar, Managing Director of Sequoia India, which was an early investor in Zomato. “It marks the maturation of India’s startup ecosystem.”
According to him, as the region’s internet economy matures, more technology-driven startups are reaching scale and considering initial public offerings. A public listing, he continues, is a significant step in a company’s development. More importantly, it demonstrates the founding team’s enormous ambition and bold vision, as well as their desire to build a company that will stand the test of time.
“This year,” Bhatnagar continues, “we have seen Indigo Paints, Appier, and Stovecraft take that critical step from the Sequoia Capital India portfolio. Several other startups from the ecosystem will follow suit in the coming months.”
While Zomato raised slightly more than $2 billion in multiple rounds from venture capitalists, Paytm raised approximately $4.1 billion in multiple rounds.
According to data available on Zomato’s website, the company reduced its losses to Rs. 8,164 million in the fiscal year ended March 31, 2021, down from Rs. 23,856 million the previous year (most Indian companies follow an April to March financial year). However, operating revenue decreased to approximately Rs. 19,938 million in 2019-20 from Rs. 26,047 million in 2018-19. In 2020-21, total revenue was Rs. 21,184 million, down from Rs. 27,427 million a year ago.
According to filings with the Ministry of Corporate Affairs, One 97 Communications, the parent company of Paytm (which stands for Pay through mobile), reported revenues of Rs 31,150 million for the fiscal year ended March 2020. It owns 39 companies, including joint ventures, as a holding company, subsidiary, or associate company.