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The IPOs of 2016 and what they mean to the startup world

Sindhu Kashyaap
11th Oct 2016
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Initial Public Offering (IPO) is one of the coveted forms of exits that startups want. After what looks like a gap of close to five years, IPO exits now seem to be gathering steam. 2013 and 2014 saw two IPO exits each year of companies that were PE-backed.

Since early last year, IPOs have again become the flavour of the season. If we look at this year alone, there were close to 48 companies that went public, 36 of which were under the present day ‘startup’ categories. The average time period to IPO for these organisations is close to 13 years.

The table below shows a list of the 36 IPOs of this year:

Image credit: Anisha Tulika Source: YourStory Research
Image credit: Anisha TulikaSource: YourStory Research

Key IPOs of the year in the startup world

If you look at the trend of the kind of sectors and companies that are able to hit the market, there is a fair amount of healthcare concentration – like healthcare service providers or diagnostic services. These are well-established diversified companies and engineering and manufacturing companies.

The consumer internet, deep tech, and new-age technology IPOs are fewer. Devendra Agarwal, Founder and CEO Dexter Capital and Co-founder of InstaOffice, believes that with the regulatory factors that come in play with IPOs, profitability is key. But companies generally take time to reach profitability.

He adds that as a company gets an IPO, apart from the management team’s responsibility of the success of the company it also becomes the responsibility of the regulator.


ipo-1

He explains:

This, however, doesn’t mean that these companies aren’t good or will never touch IPO. The regulatory requirements in India are different and are robust. Other aspects like marketability of a company’s security market are chosen by underwriters who, in turn, have to take up onus of a company.

This year, however, two exits stood out.

Infibeam

Infibeam’s IPO came at a point when questions were being asked on the sustainability of the e-commerce sector. The Ahmedabad-based online marketplace  was the first online retailer to go public, with Rs 450 crore initial share sale. The company was believed to have been fully subscribed on the last day of its IPO.

Quick Heal Technologies

In February this year, Quick Heal hit the capital markets with the price band of Rs 311 to Rs 321 per equity share and a fresh issue of Rs 250 crore. The IPO comprises an offer for sale of upto 6,269,558 equity shares by the Katkars, Sequoia Capital India Investment Holdings III, and Sequoia Capital India Investments III. Sequoia Capital currently holds 10 percent of stake. After the IPO, it will come down to six percent. The minimum bid lot is 45 equity shares, and in multiples of 45 equity shares thereafter.

Company name

SectorYears to IPOFounding yearIPO dateIPO price when listing (per equity share in Rs)Current share trading price(Rs)
BlueBlood VenturesTrading and investment92007Jan 21, 20165044
Ganga PharmaceuticalsPharmaceuticals221994Jan 29, 2016157.47
TeamLease ServicesHuman resource services142002Feb 2, 2016785 - 8501,078.90
Vidli RestaurantsChains of restaurants/food-tech32013Feb 3, 20161052.15
Quick Heal TechnologiesIT security solutions/enterprise211995Feb 8, 2016311 - 321270
Sylph Education SolutionsEducation62010Feb 10, 2016129.03
K.P. EnergyEnergy62010Feb 15, 201660 -  70103
Hi-Tech PipesManufacturing311985Feb 15, 201650121.8
Relicab Cable ManufacturingManufacturing and marketing of PVC compounds and wires and cables72009Mar 9, 20162023.1
Wealth First Portfolio ManagerFinancial services142002Mar 10, 20165054.4
Khemani Distributers and MarketingFMCG52011Mar 16, 2016100100
Healthcare Global EnterpriseHealthcare112005Mar 16, 2016205 - 218206.5
Infibeam Incorporatione-commerce92007Mar 21, 2016360 - 432820
CHD ChemicalsTrading chemicals for textiles/ textile12015Mar 21, 2016118.72
Nintec SystemsSoftware development/ enterprise12015Mar 29, 20161014.75
Franklin Leasing and FinanceFinance241992Mar 30, 20161515
Ruby CablesManufacturing201996Mar 30, 20165040.8
Sysco IndustriesManufacturing02016Mar 31, 20161018.55
Lancer Containers LinesLogistics52011Mar 31, 20161215.1
Raghav Ramming MassManufacturing12015Mar 31, 20163953.5
Equitas HoldingFinancial services92007Apr 5, 2016109-110180.75
Ghushine Fintrade OceanTextile/ trading activities of various textile materials211995Apr 25, 2016107.09
Thyrocare technologiesDiagnostic chains/ healthcare162000Apr 27, 2016420-446551.85
Bajaj HealthcareHealthcare231993Apr 27, 2016170218
Ujjivan Financial ServicesFinancial services112005Apr 28, 2016207 - 210464
Parag Milk FoodsFMCG241992May 4, 2016215 - 227326.6
Sagardeep AlloysManufacturing92007May 4, 20162019
Shanti Educational InitiativesEducation62010Jun 1, 20169093
Zeal AquaAquaculture72009Jun 27, 2016130137.7
KKV Agro PowersEnergy42012Jun 30, 2016320322.5
Advance SyntexManufacturing271989Jun 30, 20161212
Commercial Syn BagsManufacturing231993Jun 30, 20162435
Titaanium Ten EnterprisesManufacturing251991Jun 30, 201615NA
Kwality PharmaceuticalsPharmaceuticals331983Jun 30, 20163543.5
Advanced Enzyme TechnologiesHealthcare271989Jul 20, 2016880-8961,418.00
Prabhat Telecoms(India)Distribution of mobile handsets92007Jul 22, 201651

71.7

A positive sentiment

Srini Vudayagiri, Investment Director, Peepul Capital, believes that IPOs typically follow a cyclical tract. There are two things beyond the control of the company that is going for it:

  1. The regulatory process of getting everything in order, which in itself is a four-six month process.
  2. The sentiments of the public markets.

Srini adds that when a company looks for an IPO, they need to be able to forecast the sentiments and mentality of the public markets atleast four to eight months in advance. “There have been instances where companies have got approvals from SEBI and haven’t gone through the process for multiple reasons.”

This year, there have been several positive trends that have favoured the markets. There were good sentiments in the secondary markets, positive initiatives in terms of controlling inflation and a growth-oriented directive in the market.

There were also positive government reforms like push towards GST, opening of the markets, focussed initiatives towards SMEs. “People are now becoming comfortable with the idea that India will be growing at a seven to eight percent GDP level. All this contributes to positive influences,” says Srini.

What lies in the future of the consumer internet companies?

While IPO seems to be a distant dream for several consumer internet companies as they are yet to achieve scale without operating losses, yet the number of companies looking for IPO is steady and growing. Currently, there are about 50 million online shoppers in India, which is poised to touch 180 million by 2020, which is good news for e-commerce companies.

Satish Meena, Forecast Analyst at Forrester, believes that hitting public markets with scale would be a good idea. He adds:

Infibeam’s IPO is a silver lining for other consumer internet companies, but it nevertheless is more of a B2B business.

However, the main talk in the market right now is that while there are several consumer internet companies, many are yet to touch the capital markets. Srini adds that many of these companies are large, have been around for a while and had spoken about IPOs.

Most of the companies that have IPO exits are more traditional companies. “With the amount of money being pumped into newer age technology, consumer internet and deep tech business, people are questioning where the money is being spent and what is the long term plan,” says Srini.

People are looking at the visibility and path towards sustainability. Adding to this, Devendra believes:
The stock market in India values a company on its net revenue and profitability. For many tech companies in India, they don’t have visibility of the profitability or revenue generation of the current startups in India. For potential listed acquirers, it would affect their own stock market value, and they also need to see some strategic fit.
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