The huge fundraise by companies and start-ups through initial public offerings is set to drive the capex engine of India Inc. With abundant liquidity and a rise in stock market fortunes, companies are rushing to raise money via the primary route.
At the forefront of the fundraising are start-ups, which are flocking the stock markets with astronomical valuations, though many such as Zomato are yet to turn a profit. Investors are eager to buy into these IPOs, banking on growth opportunities that digital reach has afforded to these nascent companies.
The startups being listed are joining the broader India Inc, which is on cusp of a burgeoning investment capex cycle as several indicators show.
While a chunk of the IPO money is going as returns to early investors who had bet on the potential of these companies, such as Ant Financial and Softbank offloading stakes through offer for sale in the Paytm IPO, huge capital is being available for further growth initiatives.
IPO rush
At least 30 companies are looking to collectively raise over Rs 45,000 crore through IPOs during October-November. Of the total fundraising, a large chunk would be garnered by technology-driven companies, including FinTechs.
The firms that are expected to raise funds through their IPOs during October-November include Policybazaar (Rs 5,710 crore), Emcure Pharmaceuticals (Rs 4,500 crore) Nykaa (Rs 4,000 crore), CMS Info Systems (Rs 2,000 crore), MobiKwik Systems (Rs 1,900 crore). In addition, Northern Arc Capital (Rs 1,800 crore), Ixigo (Rs 1,600 crore), Sapphire Foods (Rs 1,500 crore), Fincare Small Finance Bank (Rs 1,330 crore),
Sterlite Power (Rs 1,250 crore) RateGain Travel Technologies (Rs 1,200 crore) and Supriya Lifescience (Rs 1,200 crore) may float their IPOs during the period under review.
~
Fund deployment
While Nykaa has said that it will use the IPO proceeds to set up new retail stores, fund capital spending and repay debts, PolicyBazaar plans to use Rs 1,600 crore of the proceeds to enhance visibility and awareness of its brands including Policybazaar and Paisabazaar, Rs 375 crore will be used for new opportunities to expand growth initiatives to increase its consumer base including offline presence, Rs 600 crore for funding strategic investments and acquisitions and Rs 375 crore for expanding its presence outside India. Keventer Agro will use the proceeds of Rs 155 crore will be used to repay debt and Rs 110.76 crore will be used for funding capital expenditure requirements. Start-up fundraising
The funds raised by Indian unlisted startups have crossed the $10 billion mark spread across 347 deals, according to PwC India. This was twice the amount of funding received in Q3CY20 and was up about 41% over the second-quarter figure.
The increase in funding activity was noted across all sectors, both by value and volume.
Fintech, Edtech and SaaS were the top three hot investment sectors in CY21, together accounting for about 47 per cent of the total funding activity. The fintech sector saw a four-fold increase in funds raised in the first three-quarters of CY21, over the first three-quarters of CY20. Six fintech companies reached unicorn status.
Editors View is a weekly column written by Amol Dethe, Editor, ETCFO. Click here to read his previous columns.