Is The Grass Greener For Unicorns?

An unstoppable rally is being witnessed among the start-ups when it comes to initial public offerings. But, once listed, companies fall into the greater purview of the government, the market, and investor sentiments. We talk about the challenges and criticisms these start-ups may face after entering the new domain

Ankita Mukhopadhyay

After years of investors pumping money into the stock market, sometimes with no end in sight, there seems to be hope for unicorn-rich India.

Following Zomato, the largest food delivery company in India by market share, that filed for an initial public offering (IPO) as early as April and was listed in July, a host of start-ups have queued up to float their offers.

The ongoing bull run also gives these companies an opportunity to aggressively price their shares.

FSN E-Commerce (Nykaa), One97 Communications (PayTM), and PB Fintech (owner of PolicyBazaar) have already joined the IPO bandwagon. So, is the Indian stock market experiencing a new lease of life?

The Growth Potential Of India

The multi-billion-dollar listing of Zomato and potential listings of Nykaa, PolicyBazaar, and PayTM are part of renewed investor interest in the Indian market. “Investors are betting on India’s growth potential,” said Aviral Bhatnagar, a junior VC at Venture Highway, an early-stage VC. Retail investors are considered to be the most buoyant group subscribing to the IPOs.

History shows that liquidity tailwinds have been the biggest stimulant to raise equity returns.

Excess global liquidity created by easy monetary policies of central banks around the world has led to rising stock markets, believes Rajan Gulati, an equity analyst based in Delhi. “An uptrend market, like it’s right now, helps companies to list at good valuations and raise more capital through the listing,” Gulati told Outlook Money.

India’s economy is already growing at its fastest speed since the 2008 financial crisis and measures such as federal spending are boosting medium-term growth. Along with an uptick in market sentiment, relaxation of listing rules by the Securities and Exchange Board of India (Sebi) has also uplifted investor sentiment and encouraged companies like Zomato to list in India. A listing also offers initial investors an exit route from the company.

Added to this upward trend is the pandemic that has accelerated the growth of tech companies with a platform-based model. There was a time when the maximum benefit we could derive from our cellphone was sending free SMS via bundled packages. Now, we can buy an insurance policy, food, beverages, cosmetics, and even a car at the click of a button. Online consumption will continue to see an uptick as consumption habits change in urban India and to a certain extent, semiurban India. Analysts pin down the immense market potential for the rapid growth of home-grown tech companies.