With the capital markets regulator now taking a closer look at the disclosures made by startups, several of these new age tech companies (NATC) could see their initial public offerings(IPOs)delayed.
The Securities and Exchange Board of India (Sebi) is believed to have called for more details on the key performance indicators (KPI) being put out by startups in their draft red herring prospectuses (DRHP). Among the companies that could see their public issue plans delayed are PharmEasy, OYO Hotels and Snapdeal.
Sebi’sconcerns stemmed from the steep corrections in the stock prices of startupsafterlisting which have lost anywhere between 30% and60% of their offer prices. Many of them listed at a discount to the offer price and had lost value even before the tech meltdown in global markets.
Anup Jain, managing partner, Orios Venture Partners,saidthat late-stage companies are going to see a delay in their IPOs. “With the bullishness cooling off, profitability is now a lot more important. In private markets, the focus is on growth and less so on profits but when you progress to public markets, you have to become profitable. This principle seems to have been cast aside in the hype,” Jain said.
In Q4FY22, One97 Communications, the parent of Paytm reported anEbitda loss of`729 crore while Zomato posted a loss of`449.7 crore, according to analysts at ICICI Securities and Jefferies, respectively.
Ankur Bansal, co-founder of BlackSoil,saidunless companies are profitable, their IPOs may not be successful. “Founders are now raising money through debt to meet their operating expenses. They now do not want to raise money through equity because they feel the markets are jittery. They want to keep cash in the bank so the next round of fundraising can happen at a more opportune time rather than immediately.
According to the latest Tracxn data, between April 1 and May 25, funding received by startups stood at $4.15 billion compared with $10.11 billion during the January-March quarter.
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