Around 18 unicorns to hit street with $11-12 billion IPOs in 2 years: Bofa

The fast swelling unicorn universe in the startup ecosystem is set to witness a flurry of share sales as around 18 large startups are set to hit primary markets to raise $ 11-12 billion over the next 24 months, according to a Wall Street brokerage.

The domestic startups have created around 60 unicorns, having $1 billion valuations or more, and 20 of them this year alone. Many reports predict that the number will cross the 100-mark this year, going by the massive fund inflows into startups.

A Credit Suisse report in March pegged the number at 100 already.

According to the industry report, 18 unicorn heavyweights like edtech major BYJU's, ecommerce giant Flipkart, digital payments leader Paytm, ride-hailing app Ola, and hotel and room aggregator Oyo planning to tap the IPO market over the next 24 months.

Then there are also players like online insurance retailer PolicyBazaar, furniture retailer Pepperfry, tech player InMobi, online grocery delivery player Grofers, payment app MobiKwik, Saas-based solutions Freshworks, online fashion and apparel brand Nykaa, merchant platform Pinelabs that provides financing and last-mile retail transaction technology; pharma retailer Pharmeasy, online grocery delivery platform Delhivery; Droom, and Tracxn, among others, are set to hit the market over the next two years.

Of these, Paytm (Rs 16,600 crore issue), Ola (Rs 11,000 crore issue on Monday), Policybazzar (filed for a Rs 6,000 crore IPO), Mobikwik (Rs 1,900 crore issue that opens next month), and Nykaa (Rs 4,000 crore) have already filed for IPOs earlier this month.

The first startup to hit the market was food delivery platform Zomato that had raised Rs 6,300 crore last month.

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We expect 17-18 unicorns to tap the IPO market over the next 18-24 months. Given the ample liquidity and the on-rush of retail investors who have been driving the ongoing market rally, we expect these unicorns to raise $11-12 billion, said Gaurav Singhal, Managing Director, Investment Banking, Bank of America.

Attributing the massive fund inflows into startups as a result of the radical digital transformation that has disrupted everything, he said the pandemic driven lockdowns have further driven this rally, and that this along with the huge market potential for these companies has caught the attention of global investors.

Investors are looking for some sparks in new companies as they sit on mounts of liquidity and chase valuation. On top of this, India is a global growth story, thus lots of global funds and investors are chasing assets, he said.

Singhal said the country still not having a super app like in the West, forcing us to use multiple apps, and it is also helping many startups to become unicorns.

Unicorn IPOs will change the market landscape as traditionally share sales in the domestic markets are by family businesses. But now, startup promoters are ready to dilute their stakes in IPOs, creating both exit routes as well as liquidity to primary investors, he said, adding the recent Sebi move to reduce the pre-IPO lock-in period to six months is also helping startups to unlock value.

Singhal said the internet ecosystem companies do not even control one per cent of the $3.4 trillion domestic equity market, whereas in the US, the internet ecosystem dominates the market with 40 percent of the market capitalisation.

The BSE market cap is close to $3.4 trillion or Rs 248 lakh crore now.

But with the slew of IPOs slated to hit the market, this anomaly will get corrected, he said. Singhal expects the number of unicorns in the country to grow by 75-100 percent over the next five years.

As of August 9, 18 startups became unicorns in 2021, taking the coveted tally to 60, with Upgrad becoming the latest entrant to the coveted list.

The new set of unicorns include social media startup Sharechat, wealth management company Groww, messaging platform Gupshup, social commerce startup Meesho and epharmacy Pharmeasy, Blackbuck, Droom, Ofbusiness, Cred, Moglix, Zeta, Mindtickle, Browserstack, Upgrad, among others.