Ever wondered what Reverse Merger means, even though it appears all over the internet? Well, in simple words, it is nothing but a private company holding ownership over already public companies. In this way, the private stocks and assets are now available to the general public.
To understand Reverse mergers thoroughly, one has to understand what IPO means. Initial Public Offering or IPO is a process of offering a private corporation’s share to the public in a new stock issuance.
Here both the private, as well as public parties, are benefitted, such that, Private investors obtain shares through the primary market, whereas, public investors get a chance to be a part of this globalized offering.
To understand Reverse mergers in-depth, shall we dive in deeper? A reverse Merger is also known as a Reverse Takeover or reverse IPO. It is one of the efficient ways in which a private company can go public and monetize its share effectively.
To put it in more simple words, this process is a blessing in disguise for a weaker or smaller company, that wants to acquire a bigger company. Similarly, it is a reverse merger, when a parent company merges with its subsidiary, or when a company that is losing money acquires a company that is profitable. So, in order to enjoy these perks, a few processes are to be undergone, which are listed below:
Identification of a Suitable Shell Co.
Recruiting Financial Staff
Financial Audits
Transaction Documents like a letter of intent, agreement, super 8-k
Issuance of Stock Certificates
Advantages of Reverse Merger
A simple process
A reverse merger is quite a simple process compared to IPO. It takes only a few weeks for a company to become public without raising capital under this process. Meanwhile, IPO does take a lot of months to complete the merging process, but, in the case of reverse mergers, it can be done within thirty days. And for its time and safety management, several companies prefer reverse merging to IPO.
Less risk
IPO is an uncertain process, which cannot assure that a company will go public in the end. However, a reverse merger can promise you that. Because, whenever, stock market conditions fluctuate, the time invested by the managers associated with IPO, in the deal also extends until a favourable outcome is ensured. Accordingly, a reverse merger is a time-saving process, so eventually, it will take down the risk of non-use.
A less reliant on the market
IPOs are considered to be a combination of the public offering and the capital raising function. By virtue of reverse mergers being the only mechanism for converting private companies into public companies, the process is less dependent on market conditions (because the company does not need to raise capital).
In a reverse merger, market conditions are not relevant since the offering is simply a conversion mechanism. In other words, the process attempts to capitalize on the benefits of being a publicly-funded organization.
Perks of a public company
Public companies have a high amount of revenues, which in turn is a key feature to consider converting into one. Over and above, the company’s securities then enjoy higher liquidity when they are traded on an exchange.
By gaining the opportunity to sell their interests, the original investors have a handy exit option other than having the corporation purchase back their shares. Since management may now issue extra shares through secondary offers, the firm has better access to the capital markets.
If stockholders had warrants, which give them the power to buy more shares at a certain price, exercising those rights would bring more money into the firm.
Disadvantages of Reverse Merger
An extensive investigation is needed
It is important to go through every nook and corner of the private and public companies before starting the merging process. Starting from looking into their motives to checking whether the company is neat and clean, pending liabilities, or other things that might disturb the merging. It is therefore imperative to conduct appropriate due diligence and to expect transparent disclosure (on both sides).
Dump of risky stocks
After the merger, the stock price may or may not suffer significantly if the public shell’s shareholders sell a sizable amount of their shares. So it is a must-need merger agreement to have clauses defining necessary holding periods, subsequently, lessening or completely eliminating the possibility that the shares will be dumped.
Insufficient demand shares
There is no assurance of the investors obtaining sufficient liquidity after the merger. Due to financial and operational crises, sometimes, small companies may not be ready to be in public.
In the wake of the reverse merger, the original investors may find that their shares are little in demand. Therefore, a company itself needs to be financially and operationally attractive to be a desirable investment to potential investors for its shares to be worthy.
Regulatory and compliance complexities
Inexperience managers sometimes can harm a potential private company’s journey to a publicly-traded company. In other words, when managers spend a great deal of time on administrative concerns rather than running their businesses, they can result in a stagnant and underperforming company.
In 1994 Godrej Soaps, a consumer product manufacturing business did a reverse merger with its loss-making subsidiary unit ‘ Gujarat Godrej Innovative chemical’ and named it ‘Godrej Soaps Ltd’.
ICICI Bank, India
ICICI merger with ICICI Bank
Only a few Indian companies have used the reverse IPO, making the reverse merger concept relatively new to India. In 2002, ICICI became the first firm to choose a reverse merger when it merged with its arm company, ICICI Bank, and renamed the combined entity ICICI Bank. ICICI also had two subsidiaries, ICICI Personal Financial Services Ltd. and ICICI Capital Services Ltd.
In order to offer both urban and rural consumers a wide variety of loan services, the ICICI group made the decision to do a reverse turnover. As a result, we could see the new venture’s profitability. ICICI Bank is now among the top financial institutions around the globe.
IDBI Bank
In 2005, the Industrial Development bank of India followed the reverse merge method with its commercial bank IDBI Bank.
IndiaBulls
Indiabulls merger with Indiabulls Housing Finance
Later in 2013, Indiabulls financial services Ltd consolidated capital with its subsidiary Indiabulls housing finance Ltd
REO Motor Car Company
REO merger with Nucor
Ransom E. Olds created an automotive manufacturing firm in 1905; by 1907, it had $4.5 million in total sales and was regarded as one of the richest automakers. The corporation itself turned into a tax loss carryover following the great depression that hit Western nations, and the company’s dissident shareholders coerced it to perform a reverse turnover in order to secure a respectable revenue by buying a minor publicly-traded company called Nucor.
New York Stock Exchange
NYSE merger with Archipelago Holdings
One of the world’s oldest and largest stock exchanges, which is situated on Wall street, New York city since 1792. NYSE had a reverse merger with Archipelago Holdings to go public in 2006.
Aerospatiale
Aerospatiale merger with Matra
Launched in 1970 and operating as a State-owned corporation until 1998, Aerospatiale is primarily known as an aerospace and defense manufacturing company. In order to reclaim its previous status in the market—that of a public limited company—Aerospatiale reverse-merged with Matra’s defense division to create Aerospatiale-Matra.
ValuJetAirline
ValuJet merger with AirTran
An airplane manufacturing company established in 1992 that regularly operates international flights in the eastern United States and Canada. The company experienced many aviation crashes in 1996, which contributed significantly to the company’s downfall. The following year, the corporation bought a tiny company called AirTrainAirways and renamed the new company “AirTrainAirways” to increase its customer base again.
US Airways
U.S Airways merger with America West Airlines
It was founded in 1937 and ceased its operation after the airline company went insolvent in the early 2000s. Later, the government filed for ‘chapter 11 bankrupt’ permitting the airline to reorganize. That’s when American West Airlines was acquired with the goal to remove the chapter 11 bankruptcy in 2005.
ABC Radio
ABC merger with Disney
American Broadcasting Company was an American radio network that was reverse merged with Citadel Broadcasting corporation to spin off its former parent- Disney in 2007.
CBS Radio
CBS merger with Entercom
One of the renowned news radio networks, which was launched in 1928 has more than 1000 radio stations in the United States of America. In February 2017, CBS acquired a majority of shares in Entercom and acquired it for the purpose of spinning off its former parent CBS radio.
T-mobile US
T Mobile merger with MetroPCS
It is an American public wireless telecommunication corporation, which is owned by its parent German telecommunication company- Deutsche Telekom (DT). Later, the company had a reverse IPO with MetroPCS, an American prepaid wireless service provider.
VMWare
VMWare merger with Dell
It is an American cloud computing and virtualization technology company, founded in 1998 by Mendel Rosenblum, Diane Greene, Scott Devine, Ellen Wang, and Edouard Bugnion. VMWare did reverse turnover with Dell, an American technology enterprise for a price with a plan to be back as a public company in the stock market.
Eddie Stobart
Eddie Stobart merger with Westbury Property
Eddie Stobart commenced as an agricultural business in the mid-19th century, which was later turned into the largest privately-owned transport & distribution company by William Stobart and Andrew Tinkler in 1976.
Eventually, the company demerged with two separate public enterprises- Stobart Group and Eddie Stobart Logistics to function their operations under one company ‘Eddie Stobart Logistics’.
In 2007, Westbury Property fund purchased Eddie Stobart Logistics for £137.7 million: £62 million in cash and £76 million in new Westbury Property Fund shares that made Eddie Stobart gain stock market listing.
Fisker Inc.
Fisker Reverse merger with Spartan Acquisition
Recently, in 2020, the famously known American electric vehicle automaker which was established by Henrik Fisker and his wife Geeta Gupta Fisker in 2016 decided to go public after reverse merging with Spartan Acquisition corporations.
Pierre Omidyar is an American Entrepreneur and a software engineer who founded the successful online auction platform, eBay in 1995. He was the Chairman of the company from 1998 to 2015. He soon became a billionaire as soon as eBay issued an Initial Public Offering (IPO) in 1998. As of 2021, he has an estimated net worth of$21.4billion and is said to be the 24th richest person in the world.
In 2010, he launchedan investigative news service, Honolulu Civil Beat. He created a journalism venture called First Look Media in 2014. As a Philanthropist, he and his wife cordially founded Omidyar Network in 2004 with an aim to expand their efforts beyond non-profits to include for-profits and public policy, which would serve the purpose of the philanthropic investment firm.
Pierre was born to Iranian parents, who migrated to France for higher studies. He grew up in Paris and was formerly named Parvez. His father, Cyrus Omidyar is a surgeon, who currently practices in Aliso Viejo, California.
His mother, Elane Mir-Djalali is an academic who earned her doctorate in linguistics at the Sorbonne. The family shifted to the US owing to his father’s job location, as he initially worked as an urologist at Johns Hopkins University in Baltimore.
He married Pamela Karr, who is also one of the co-founder of his philanthropic firm, Omidyar Network. He is also a benefactor to the US Democratic Party candidates and organizations. In 2010, he joined Bill Gates and Warren Buffet’s “giving pledge”. He publicly committed to giving the majority of his wealth for charitable causes and becoming a philanthropist.
“When you create wealth in a short time, you think about philanthropy as you think about a business.” –Pierre Omidyar
Pierre Omidyar – Education
Pierre completed his elementary studies from Punahou School in Honolulu and he currently serves on its Board of Trustees. He took a great interest in computers while studying in ninth-grade at The Potomac School in McLean, Virginia. He graduated from St. Andrew’s Episcopal School, Maryland in 1984.
He completed his bachelor’s degree in Computer Science from Tufts University, Massachusettsin 1988. During his undergraduate years, he also studied at the University of California.
Pierre Omidyar – Professional Life
After completing his studies, Pierre went to work for Claris, a subsidiary of Apple Computer. He worked there on the team that upgraded MacDraw to MacDraw II. He co-founded a pen-based computing startup, Ink Development in 1991. However, his startup was later re-branded as an e-commerce firm with the new name of eShop Incorporation. The company was acquired by Microsoft on 11 June, 1996 for less than $50 million and he earned $1 million from the deal.
Pierre Omidyar- Founder of eBay
eBay logo
Pierre established his e-commerce company, eBay in 1995. The company is headquartered in San Jose, California. At age 28, he started coding for an online venture that would enable a direct person-to-person auction for collectable items. On 4 September 1995, he launched the online auction service called Auction Web which eventually became the auction site eBay.
By 1996, he signed a licensed deal of selling airline tickets online. It hosted two million auctions within the first month. By 1997, he renamed the company from Auction Web to eBay and was strategic enough with effective advertising.
He served as the Chairman of the company from 1998 to 2015. He also served as the Board member of eBay till 2020. Omidyar was named under the billionaires after eBay launched its IPO successfully in September 1998.
The company bought an online payment company, PayPal in 2002. However, the payment firm spun-off and currently Omidyar owns 6% of it. In 2020, he stepped down from the Board of eBay owing to his involvement of a broader overhaul of the company. At eBay, he will continue to serve as director emeritus, which is an honorary title.
Pierre Omidyar – Founder of Omidyar Network
Omidyar network Logo
Pierre and his wife, Pamela established his philanthropic investment firm, Omidyar Network in 2004. The organization aims at improving the lives of people by creating opportunities and enhancing the power of markets. It basically invests in innovative organizations to beget economic, social and political change.
Reportedly, it has committed more than $992 million to nonprofit organizations and for-profit companies that stimulate economic advancement and revitalize individual participation across multiple investment areas.
Mr. and Mrs. Omidyar along with Richard Branson had established the Nduna Foundation (Founder- Amy Robbins), Enterprise Zimbabwe in 2010. He further established Luminate, a global philanthropic organization in 2018. After governing it for ten years, Omidyar separated the organization into a separate unit.
Pierre Omidyar – Founder of Honolulu Civil Beat
Honolulu Civil Beat
Pierre has been involved in online journalism since 2010, and he is serving as the head of investigative reporting and public affairs news service, Honolulu Civil Beat which covered civic affairs in Hawaii. The venture later partnered with HuffPost with the latest weblog regional addition, HuffPost Hawaii. Starting a media company of his own and providing people with real facts was his aim.
The news outlet is all about providing people all the news related to public affairs. All the public issues that outlet report has only one aim and that is to educate people and the community and make them aware of all kind of situations.
Pierre Omidyar – Founder of First Look Media
First Look Media Logo
Pierre Omidyar founded this media organisation in the year 2013 with the only goal in his mind to empower independent journalists and make their voices heard. It is a nonprofit organisation that focuses on investigative journalism and documentary filmmaking.
Omidyar started this project and promised to provide funds of $250 million and decided to aid different publications. The organisation started the journey of supporting publications by launching The Intercept. Not only that, First Look Media started producing podcasts as well.
Omidyar focus through First Look Media was to hold the importance of freedom of expression and freedom of the press. Pierre Omidyar decided to develop the organisation in such a way that the media will provide information to the audience in a way of storytelling.
Pierre Omidyar – Honors & Awards
Received the Honorary doctorate from Tufts University in 2011
Bestowed with the EY Entrepreneur of The Year National Winner in 1999
Conferred with the Golden Plate Award of the American Academy of Achievement in 2000
He was named the 2018’s Third Most Influential French Entrepreneur by Richtopia
FAQ
What is the Net worth of eBay owner Pierre Omidyar?
As of 2021, the net worth of Pierre Omidyar is$21.4billion.
Pierre Omidyar is the founder of what ecommerce platform?
Pierre Omidyar co-founded a pen-based computing startup, Ink Development in 1991. However, his startup was later re-branded as an e-commerce firm with the new name of eShop Incorporation.
Why did Pierre Omidyar create eBay?
Pierre Omidyar created an online auction site to help his wife trade and collect Pez candy dispensers.
How does eBay make money?
eBay makes its money from the section on transaction fees, which it applies to sellers.
An IPO (Initial Public Offering) is a company’s coming out of the box moment, where a company goes public to raise money in exchange for shares that are a part of their company in the form of equity. If all goes well, the investors will scramble and rush to buy the stock, thus increasing the demand for their shares which will give them the rooftop listing prices. This is only the optimistic way of looking at this, of course; you can’t predict the outcome of how your stock will perform during the opening.
But what if nobody shows up?, what if nobody buys your IPO? surely initial public offerings are a very good way of raising huge sums of initial capital but there are always downsides to it, like opening up to a wider public and dealing with market moods and cranky shareholders which are often not predictable.
When is an IPO considered a failure?
If the stock prices of the company do not meet the valuation at which the stock was listed, then the IPO is considered a failure.
There were several booms in IPOs in India, but not every IPO was able to reap the valuation that it desired. Let’s know some of the biggest IPO failures.
Listed in the year 2008, Reliance Power was also known as the dream IPO of Anil Ambani; this IPO ran very well on the hype wave and took the global market by storm. It was a hit even before reaching the market, and the speculations valued it at almost 190 billion dollars in the local market and also 100 billion dollars from foreign investors. It was one of the biggest IPOs to ever hit the market. But after all this, the IPO listing story was different. Only after a few days of listing did the price of Reliance Shares come crashing down, as if just the name of the company was not enough, nor the tag of Ambani. Very soon the dream run of Ambani’s Reliance Power came to a standstill and fast forward to today, the stock price of Reliance Power is down 99% from the listing price. There is nothing more to say after this, there will never be a bigger failure in the history of the stock market.
Paytm
2021 was such a dream run for all the stocks as the markets were breaking records and touching sky-high levels several times. Also known as the golden year for IPOs, Paytm is also a fintech company that launched its IPO in 2021. The failure can also be blamed on the extreme optimism of the company which issued it at a very over-the-top valuation which was around Rs 18,300cr. But even though the opening of the stock was very weak, it was listed in 1955 against the issue price of Rs 2150. Soon the stock lost close to 75% of its value and is trading at around 600 per share. Some blamed the company’s financials for its performance and some blamed its bloated listing price, and some even blamed it for hitting the market too soon; all said and done, the IPO was one of the biggest failures in the history of financial markets
Why Paytm IPO failed?
Zomato
Zomato – Failed IPO
Even though one of the leaders in its sector Zomato is still a loss-making company and this has directly affected its IPO and market value. Hitting the market in 2021, Zomato had a pretty good run and had pretty good listing gains. But all of this came crashing down when Zomato shares faced a reality check when it lost 47% of their value in a single month of June 2021, and it is currently trading below its listing price.
RateGain Travel Technologies
RateGain – Failed IPO
Although this stock cannot be totally described as a total failure, it didn’t do any wonders either. It was listed on the stock market in January 2022 and it had a wonderful run when the stock zoomed more than 25% in less than a month of its listing. But soon the sunny days of the stock were over and currently, it is trading around 11% below its issue price
Cartrade Tech
CarTrade Tech – Failed IPO
Issued in the year August 2021, CarTrade Tech was one of the biggest failures an IPO has ever faced in such a short period of time. Even though the CarTrade Tech IPO was subscribed 20.29 times & the public issue was subscribed 2.75 times in the retail category, the optimism did not last long. Even though the stock had its dream run for a couple of months, then corrected itself and lost almost 35% of its value in the next couple of months.
Launched in August 2021 Krsnaa Diagnostics is one of India’s largest diagnostics providers.
Even with a lot of optimism lurking around after debuting at a 7% premium over the issue price, this dream run did not last very long, the stock price of the company quickly lost its value after the declaration of its increased loss in FY20. The stock is currently trading close to -30% of its value from its issue price.
SjS Enterprises
SjS enterprises – Failed IPO
One of the leading players in the Indian decorative aesthetics industry, SjS enterprises was a unique niche to hit the market, but that certainly was not enough to impress the investors. Even the debut of the IPO was very weak as it opened 5% below its issuing price. After debuting in the market in November 2021 the fate of the company’s stock did not change anytime soon and is still trading around 20% below its issue price, a part of the blame can be given to the low revenue growth of the company and low-income turnout too.
Kalyan Jewellers India
Kalyan Jewelers – Failed IPO
The IPO of this company was largely hit by the lockdown that was enforced throughout the country for the second time which forced Kalyan Jewelers to shut down all the stores in India, this made them lose 30% + of their revenue in a single quarter which disappointed the investors.
Issued on March 2021, it can be fairly said that Kalyan Jeweler’s IPO was a failure largely due to their entry timing in the market and not due to any other aspect of their business.
It was one of the latest issues in the line of IPOs hitting the market in October 2021 and it definitely was not a hit. Fino Payments Bank’s IPO was launched in January this year and it has a PE ratio of 86.41 which did not impress the investors at all. The stock is down more than 30% year to date already.
Aditya Birla Sun Life AMC
Aditya Birla Sun Life AMC – Failed IPO
Issued in September 2021 Aditya Birla Sun Life AMC had huge speculations and optimism attached to its IPO both by the investors and the company.
There were only two objectives of the IPO
Achieve the benefit of raising capital from the large public market
Execute the sale of 38,880,000 shares at a good price by selling them to the shareholders
Even though the finances of the company were healthy, the company’s IPO was largely hit by the sentiment of the market which made the share prices fall more than 21% from their issue price.
Suryoday Small Finance Bank
Suryoday Small finance Bank – Failed IPO
Hitting the market in march 2021 when major big names in the market were shooting for IPOs proved out to be costly for this company, it seems having a good book value and good P/E ratio was not enough for Suryoday Small finance Bank and did not help in a better performance at the market. Zoom in to today the company has lost more than 55% of its value and is still on a bearish run just because of bad timing in the market.
FAQs
Which Top company’s IPOs have failed?
Some of the biggest failed IPOs are:
Reliance Power
Paytm
Zomato
RateGain Travel Technologies
Cartrade Tech
Krsnaa Diagnostics
SjS Enterprises
Kalyan Jewellers India
Fino Payments Bank
Aditya Birla Sun Life AMC
Suryoday Small Finance Bank
When is an IPO considered a failure?
When the stock prices of the company do not meet the valuation at which the stock was listed, then the IPO is considered a failure.
Why did Kalyan Jewellers IPO fail?
Analysts believe that the shares of Kalyan Jewellers IPO were overvalued compared to its profitability in the market.
Which is the best IPO?
As per performance, some of the best IPOs in 2022 are:
The ride throughout the year 2021 was a turbulent one. There were many things taking place simultaneously. Many things were also happening for the first time or creating records. One of the similar record-breaking things that occurred throughout the year 2021 was the companies going public.
More than 63 companies went public in 2021 together raising the amount of Rs 1,19,882 crore. This was the newest formed record of raising the highest funds through IPOs breaking the old record of Rs 75,279 crores formed in 2017.
Following the given data and current market conditions. There can be some debate on Indian Companies going public. Amongst the list of multiple companies going public, below given is the list of startups and companies going public in India in 2022.
Bajaj Energy Ltd. is an Uttar Pradesh based company launched in 2008 working in the field of thermal energy plants. It is one of the largest private-sector thermal generating companies dealing with the financing, operating, and generating of thermal power. The recorded revenue for the year 2021 was above the range of 500 cr.
Bajaj Energy is also listed in the companies going public to pay debts and acquire partners’ stakes. With the listing, the company intends to raise Rs 5450 crores. Amongst them, Rs 5150 crores belong to the newly issued IPO, and the remaining Rs 300 crores an offered for sale shares.
2. Aadhar Housing Finance
Aadhar Housing Finance Logo
Aadhar Housing Finance is the largest housing finance company launched in 1990. The revenue collected by Aadhar Housing Finance in 2021 was about 1363.36 crores rupees. For the year 2022, Aadhar Housing Finance is listed as an IPO with an issue size of Rs 7300 crores. The funds collected will be used to boost their capital base. Amongst Rs 7300 crores, freshly issued shares are worth Rs 1500 crores, and the remaining Rs 5800 crores are offered as a resale.
3. Studds Accessories
Studds Accessories Logo
Studds Accessories is a well-known name for two-wheeler accessories. It was introduced in 1983 to provide two-wheeler accessories and related products. The revenue collected by Studds Accessories in 2021 was about Rs 479.62 crores. Studds Accessories will take the chance to raise Rs 450 crores with Rs 98 crores as a freshly issued and Rs 39.39 lakhs as an offer for shares by going public in 2022.
4. Arohan Financial
Arohan Financial Services Logo
Arohan Financial Services is the leading Non-banking financial company- a microfinance institute launched in 1991. It provides loan services in financially low-Income states of India. The operating revenue calculated by Arohan Financial Services in 2021 was above Rs 500 crores. Arohan Financial is also listed for IPO with an issue size of Rs 1800 crores. Amongst them, Rs 850 crores will be issued freshly and the remaining will be Offer for sale (OFS).
5. ESAF Small Finance Bank
ESAF Small Finance Bank Logo
ESAF Small Finance Bank is one of the leading banks introduced in 2016. The bank works towards providing several services such as client base size, net interest margins, etc. The operating profit recorded by ESAF Small Finance Bank in 2021 was about Rs 415.84 crores, a 28.07% increase from earlier. ESAF Small Finance Bank is also listed as a company going public in 2022 with a total issue size of Rs 998 crores. Within them, the freshly issued size is Rs 800 crores and the remaining Rs 198 crores are from OFS.
6. OYO
OYO Logo
OYO is a new-age technology platform giving out hospitality services. It is one of the leading platforms in the hospitality sector since the time of its introduction in 2012. The total revenue of OYO for 2021 was about Rs 41750 crores. There was a drastic decrease noticed in the revenue of OYO from 2020 to 2021 all because of the pandemic. However, for a better future, OYO is also listed for IPO 2022 with a total issue size of about 8430 crores with freshly issued shares of Rs 7000 crores and an offer for sale of Rs 1430 crores.
7. Snapdeal
Snapdeal Logo
Snapdeal is an Indian leading e-commerce company founded in 2007. Snapdeal was originally launched as a coupon booklet platform, however, in 2010, it was fully converted into an online shopping platform.
Revenue collected by Snapdeal in the year 2021 was about Rs 471 crores which was about 44% less than the previous year. Snapdeal is all prepared to raise funds from the IPO of freshly issued shares of Rs 1250 crores and some other OFS shares of the present investors and shareholders.
8. Delhivery
Delhivery Logo
Delhivery is a new age India-based logistics service company inaugurated in 2011. Delhivery works towards providing multiple facilities such as express parcel deliveries, good deliveries, cross-border supplies, etc. The revenue collected by Delhivery in 2021 was Rs 4644 crores with a 28% increment seen in its total income from the previous year.
Delhivery is also set to raise funds in 2022 by IPO with an issue size of Rs 7460 crores. Amongst them, Rs 5000 crores can be counted as freshly issued and the remaining shares can be taken as OFS.
9. Emcure Pharmaceuticals
Emcure Pharmaceuticals Logo
Emcure Pharmaceuticals is considered one of the leading pharmaceutical companies engaging in various services such as developing, manufacturing, and marketing medicines at a large level. Emcure was introduced in the year 1981 and now is considered the largest brand helping in the therapeutic areas of gynaecology, HIV antiviral, etc.
The revenue collected by Emcure Pharmaceuticals in 2021 was about Rs 6091.8 crores with a significantly increased income of Rs 418.6 from the previous year’s data. Emcure will also be raising funds through IPO for newly issued equity shares of Rs 1100 crores and some other OFS shares.
10. FabIndia
FabIndia Logo
FabIndia is India’s largest platform especially popular for its handmade products. It is a private platform that enables the sale of products made from traditional methods, skills, and techniques.
FabIndia was launched in 1976. The revenue collected by FabIndia in 2021 was about Rs 1059 crores with a fall of 30% in its revenue when compared with previous years’ data. FabIndia is looking forward to raising the funds through IPO for its purpose of global expansion by the issue size of Rs 4000 crores.
Droom is an operated marketplace easing out the process of buying and selling automobiles through its platform introduced in the year 2014. Droom operates with the help of a combination of an e-commerce platform integrated with a technology-driven prosperity ecosystem of products and services for the automobile industry.
Droom reported revenue of Rs 135.53 in the year 2021 with a slight increment noticed from the data for 2020. Droom will be going public to raise funds of an issue size of Rs 3000 crores.
12. Ixigo
Ixigo Logo
Ixigo launched in 2007 and operated by Le Travenues Technology is an Indian AI-based travel portal. It works to facilitate travelling by helping Indians with planning, booking and managing their trips of different modes. The recorded revenue of Ixigo in 2021 was about Rs 135.6 crores with a reported increment of 21% in its revenue from the previous year.
The list of IPO for 2022 also includes the name of Ixigo with a total issue size of about Rs 1600 crores. Within them, Rs 750 crores will be raised with freshly issued equity shares and the remaining Rs 850 crores will be OFS.
13. VLCC Healthcare
VLCC Logo
Vandana Luthra Curls and Curves (VLCC) is an Indian brand focusing on beauty and wellness products introduced in the year 1989. VLCC products are popular in the field of wellness and beauty products. Along with that, VLCC also works by training students with more than 95 institutes across India.
In the year 2021, VLCC reported a net income of about Rs 5,652.42 million, with a profit of Rs 62.42 million. In 2022, VLCC is expected to go public with the issue size of Rs 300 crores of newly issued equity shares and some OFS.
14. Hinduja Leyland Finance
Hinduja Leyland Finance Logo
Hinduja Leyland Finance Limited was incorporated in 2008 with the service of providing NBFC services to urban and semi-urban markets. It provides financing help for a large range of products falling in the category of vehicles and housing finances. The net worth of the company as reported by Hinduja Leyland Finance Limited in the year 2021 was about Rs 3825 crores.
There were significant changes seen between the years 2020 and 2021 due to the visible effects of a pandemic. Hinduja Leyland Finance Limited is about to raise funds from its initial public offerings of an issue size of Rs 700 crores. Amongst them, Rs 500 crores are freshly issued equity shares with the remaining as OFS.
15. Inspira Enterprise India
Inspira Logo
Inspira Enterprise India Pvt Ltd is a competent and professional provider of cyber security introduced in 2009. They provide digital transformation and cybersecurity services to their clients with bold thinking and path-breaking techniques.
The revenue collected by the company for the year 2021 was about Rs 803 crores. Inspira Enterprise India is also listed to go public in 2022 with an issue size of Rs 800 crores for foreign expansion.
16. Medi Assist
Medi Assist Logo
Medi Assist Healthcare Services Ltd offers a complete cashless hospitalization of customers through a network of healthcare service providers. It was launched in the year 2000 and mainly deals with the health insurance ecosystem. Medi Assist is also ready to raise funds through IPO in 2022 with a total issue size of about Rs 800 crores.
17. SAMHI Hotels
SAMHI Hotels Logo
SAMHI Hotels is one of the fastest-growing hospitality management companies since the time of its introduction in 2010. SAMHI Hotels mainly focus on the investment and development of international branded hotels across India.
From the year 2020 to the year 2021, there was a decrease in the revenue of SAMHI Hotels due to the presence of the pandemic period. SAMHI Hotels has a registered IPO of issue size Rs 2000 crores with Rs 1100 crores will be freshly issued shares.
18. Chemspec Chemicals
Chemspec Chemicals Logo
Chemspec Chemicals is a leading manufacturer of additives for FMCG ingredients worldwide. It was established in 1975. Chemspec Chemicals is also known to supply and manufacture Pharmaceutical drugs. Chemspec Chemicals has recorded its operating revenue to cross Rs 500 crores and it is estimated to go public with an IPO size of Rs 700 crores.
19. Shri Bajrang Power And Ispat
Shri Bajrang Power And Ispat Logo
Shri Bajrang Power And Ispat was founded in 2002 and is considered a major steel producer. It is considered one of the leading integrating steel companies working towards providing different products such as TMT bars, billets, sponge iron, etc.
As per the president of the company Shri Bajrang Power And Ispat, the revenue noted for the year 2021 was around Rs 3,031.21 crores with a net profit of Rs 312 crores. It is also listed for IPO with an issue size of Rs 700 crores planning to halve its debt by using funds.
20. SREI Equipment Finance
SREI Logo
Established in 1989, SREI Equipment Finance deals with infrastructure financing services throughout India. The company provides a loan facility for the purchasing of various equipment used in the construction industry, irrigation, IT infrastructure, etc.
The recorded revenue of SREI Equipment Finance is about Rs 522.78 crores in 2021. The company is looking to launch its IPO at the desired time with an issue size of Rs 2000 crores. In them, 1100 are freshly issued equity shares and the remaining are OFS.
Launched in 2008, Gemini Edibles and Fats Oil works in the business of manufacturing and marketing edible oils and fats. They are also considered one of the leading palm oil plantation companies across the globe. For the year 2021, the revenue collected by Gemini Edibles was about Rs 7,765.96 crore with Rs 185.85 crores.
Unlike other businesses, Gemini Edibles saw not much change in its demand as the demand for cooking oil was increased by houses whereas, on other hand, restaurants and hotels saw a sharp decline in demand hence equalizing the situation. For the year 2022, Gemini Edibles and Fats Oil are listed under the IPO list with an issue size of Rs 2500 crore from OFS.
22. Sterlite Power
Sterlite Power Logo
Sterlite Power founded in 2010 works as one of the leading private sector power transmission infrastructure developers and solutions providers. Sterlite Power owns and manages power transmission assets across India.
As per calculations the revenue collected by Sterlite Power is above Rs 500 crores but with a 26% decline in its operating revenue from the previous year’s data. Sterlite Power is listed in the IPO list 2022 with a freshly issued size of Rs 1250 crores. The raised funds will be mainly used to repay its debt.
23. Paradeep Phosphates Limited
Paradeep Phosphates Logo
Paradeep Phosphates Limited [PPL] was established in 1981 and is now considered India’s third-largest producer of non-urea fertilizer and the second-largest producer of di-ammonium Phosphate. PPL deals with the production, trading, and distribution of various fertilizers.
The total revenue recorded by PPL for the year 2021 was about Rs 5183.94 crores which was slightly higher than last year. PPL is planning to raise Rs 1255 crores from fresh sizes issued. These funds will be used to pay debts and to partly finance the acquisition of a fertilization manufacturing company in Goa.
24. Fincare Small Finance Bank
Fincare Logo
A smart banking platform launched in 2017 with its prime focus on unbanked and underbanked customers to get banking services with smart technology. The model of Fincare works by providing needed financial aid to businesses or individuals through the help of technology.
The revenue collected by Fincare in 2021 was about Rs 674.99 crore with a net profit of Rs 101.98 crores. Fincare Small Finance Bank is also known to raise funds through Initial Public Offerings of the issue size of Rs 1330 crores. Amongst them, 330 shares are newly issued and all others are from OFS.
Penna Cement is known to have its revenue above Rs 500 crores for the year 2021 with a significant increment of 13.06% in its net worth. Penna Cement is expected to raise a total of Rs 1550 crore through IPO. The funds raised will be then used to pay for borrowings, upgrading its law griding and cement mill, setting up a waste heat recovery plant, etc all at different places.
26. PharmEasy
Introduced in 2014, PharmEasy is a one-stop medical solution providing. They provide complete services from the booking of diagnostic tests to providing Over the counter medicines. They provide medical services such as radiology tests with the home delivery of needed products. The revenue collected by PharmEasy in 2021 was about Rs 2360 crore. PharmEasy has also participated in the upcoming IPOs list with an issue size of Rs 6250 crores.
27. Adani Wilmar
Adani Wilmar Logo
Adani Wilmar, founded in 1999 is one of the leading names in the edible oil industry. One of the most popular edible oils of Adani Wilmar is Fortune Oil. Adani Wilmar was known to be open on 27 January with a subscription of 17.37 times.
28. AGS Transact Technologies
AGS Transact Technologies Logo
Founded in 2002, AGS Transact Technologies is considered one of the largest integrated omnichannel payment solutions providers in India. They provide customized services and products mainly consisting of ATM and Cash recycler machines outsourcing, cash payment and digital payment solutions, etc.
The company recorded its revenue for the year 2021 as Rs 484.76 crores with a slight increment noticed in the revenue. For the year 2022, AGS will be going public with a total issue size of Rs 680 crores of IPO.
29. Vedant Fashions
Vedant Fashions Limited Logo
Introduced in 2022, Vedant Fashions Limited is a parent enterprise for some well-known brands such as Manyavar, Mohey, and Mebaz. The company Vedant Fashions Limited is considered a one-stop solution for every occasion by its customers.
The company was recorded to calculate less revenue collected from the year 2020. There was a gradual increment in its revenue from the year 2019 to the year 2020. However, it called for 38% in the year 2021 owing to the pandemic period. For 2022, Vedant Fashion is listed for raising funds through public offerings by the size of Rs 3149.19 crores.
30. Uma Export
Uma Exports Logo
Founded in 1988, Uma Export earlier was known to export and import building materials, however, in the current scenario, it is one of the leading exporters of agricultural products. The agricultural products are collected from the various parts of India to export and import to certain destinations.
The recorded revenue by Uma Export in 2021 was around Rs 260.94 crores with a net profit margin of around 1.72%. Uma Export is listed to raise funds by public offerings in 2022 with an issue size of Rs 60 crores.
Introduced in 1986, Ruchi Soya is the largest producer of edible oil in India. In 2019, Ruchi Soya was acquired by Patanjali Ayurved. Ruchi Soya has its prime focus on the business of processing oilseeds and refining crude oil to make it edible. Ruchi Soya is listed as Follow Public Offerings (FPO) consisting of freshly issued shares of about Rs 4300 crores.
32. Veranda Learning
Verdana Learning Solutions Logo
Established in 2018, Verdana Learning Solutions Private Limited is an e-learning platform giving out various career-defining courses. Courses can be found in a range of fields preparing one for the competitive exams or personal growth. The revenue collected by Veranda Learning in 2021 was around Rs 4.86 crores and a slight decline in its net profit margin. Veranda Learning is also listed for IPO with an issue size of Rs 200 crores.
33. Skanray Technologies
Skanray Technologies Logo
Incorporated in 2007, Skanray Technologies is considered one of the well-known players in the Indian medical device market. Skanray Technologies’ prime focus is to design, develop, manufacture and supply medical devices.
In the early five months of 2021, the revenue collected by Skanray Technologies was about Rs 88.8 crore rupees. The IPO size of the company is about Rs 400 crores. The funds will be invested in the required capital investment of the company along with some other basic investments such as inorganic plants and the company’s subsidiaries.
34. Five Star Business Finance
Five Star Business Finance Logo
Founded in 1984, Five Star Business Finance provided small loans to business owners and small mortgage loans to eligible candidates for their needs. It is registered with RBI as an NBFC company working with its underwriting model to provide secured finances. Five Star reported a gradual growth in its total income from the year 2020 to the year 2021 by the amount of Rs 787 crores to Rs 1051 crores respectively. The Five Star IPO issue size is Rs 2752 crores and it all comprises OFS.
35. Keventer Agro
Keventer Agro Logo
Introduced in 1986, Keventer Agro is considered the largest FMCG company in eastern India with its focus on packaging, dairy, and fresh food products. The company deals with multiple aspects of the food industry such as frozen food, beverages, export for food, etc.
The recorded revenue for the year 2020-2021 was around Rs 836.02 crores with a net loss of Rs 76.17 crores. The IPO size of Keventer Agro is about Rs 350 crores fresh issued and some other OFS. The funds will be used to be paid as debt and as a fund for the capital expenditure required by the company.
36. Tracxn Technology
Tracxn Technology Logo
Founded in 2013, Tracxn Technology is the combination of human analysts with Artificial Intelligence to work for the benefit of humans. It is considered a research firm that provides needed information for venture capitalists and corporate development offices through a large amount of data.
Tracxn reported a revenue of 100 crores with 70% of its revenue coming from outside of India. For Indian Market, Tracxn’s IPO issue size will be Rs 500 crores.
37. Apeejay Surrendra Park Hotel
Founded in 1987, Apeejay Surrendra Park Hotel is a hotel company providing services such as hotel rooms, dining restaurants, recreational and entertainment facilities, and providing venues for different purposes such as weddings, birthday events, etc.
The operating revenue collected by Apeejay Surrendra Park Hotel was between Rs 100 – 500 crores with a slight decline noticed from the year 2020 due to the pandemic period. Apeejay Surrendra Park Hotel is considered to go public with the issue size of Rs 1000 crores.
38. Harsha Engineers
Harsha Engineers Logo
Starting in 1986, Harsha Engineers is considered the largest manufacturer of bearing cages with almost 50% of the market share. They provide best-bearing cages with some other special-purpose stamped components. Harsha Engineers reported revenue of Rs 629.46 crores in the year 2021. Harsha Engineers is prepared to raise the funds through public offerings by the issue size of Rs 755 crores.
39. Annai Infra Developers
Annai Infra Developers Logo
Introduced in 2008, Annai Infra Developers belongs to the construction industry. They construct and sell multiple products such as water tanks, ponds, canals, roads, irrigation systems, etc. Annai Infra Developers will also be raising funds through IPO in the year 2022 of the issue size of Rs 250 crores.
40. Prudent Corporate Advisory Services
Prudent Logo
Started in 2000, Prudent Corporate Advisory Services Ltd is a leading investment providing solution company. It mainly deals with the financial services products such as Mutual funds, insurance, bonds, etc. The revenue for Prudent Corporate was counted as $412 million. Prudent Corporate is all prepared to raise its IPO in 2022 with yet to be declared OFS.
41. Tamilnad Mercantile Bank
Tamilnad Mercantile Bank Logo
Previously known as Nadar Bank, it was introduced in 1921. Tamilnad Mercantile Bank is one of the oldest private sector banks in India. Tamilnad Mercantile Bank calculated its revenue of 3,992.52 crores in 2020. For the year 2022, it is believed to raise funds through Public Offerings of 15.83 million freshly issued shares and 12.505 million shares from OFS.
42. Narmada Bio-chem
Narmada Biochem Logo
Established in the year 1996, Narmada Biochem is known to serve farmers for more than two decades. They are the leading manufacturer of world-class organic and biofertilizers. Narmada Biochem is noted to have its revenue in the range of Rs 100 – 500 crores. For the year 2022, it is planning to raise funds with an issue size of Rs 90 crores.
43. Popular Vehicles and Services
Popular Vehicles and Services Logo
Founded in 1984, Popular Vehicles and Services were introduced as the first batch of vehicle dealers by Maruti Suzuki. They are one of the popular automobile dealers with regional specific markets and centers The revenue noted by Popular vehicles and services in 2021 was around Rs 2,919.25 crores. They are also prepared to raise funds through IPO with an issue size of Rs 150 crores.
44. Fusion Microfinance
Fusion Microfinance Logo
Fusion Microfinance was started in 2010 with the thought of creating opportunities at the bottom of the pyramid. They provide financial help to un-served and underserved females from rural India. They focus mainly on increasing the come individuals to help increase the economic growth and prosperity of the whole country.
The noted revenue of the firm Fusion Microfinance in 2021 was about Rs 730.31 crores. They are also determined to raise funds through IPO 2022 by the issue size of Rs 600 crores and an additional OFS with 2,19,66,841 equity shares.
Conclusion
IPOs stand for Initial Public Offerings shared by any company or firm. Companies start taking investments from the public in return for the share of the firm. The amount collected by companies is then used for the advancement of the same firm. Many companies are opening up on getting public due to several situations. A list of companies going public in the year 2022 is shared above.
FAQs
Which is the best IPO in 2022?
Many IPOs are coming in the year 2022, some of the biggest and best ones are LIC. Other biggest IPOs of the year are Delhivery, Oyo, and PharmEasy.
Where can I get IPO data?
Bloomberg, Capital IQ, and CB Insights are some of the top sources to get complete information about upcoming IPOs.
Human beings not only think about their present but also about their future, so it is significant to do something that will at least give them financial security and help them in growing their wealth. None of us is aware of our future, so instead of sitting quietly and doing nothing, it is better to invest in something that can at least play the role of an umbrella for us during a rainy day.
Life Insurance Corporation of India also known as LIC is the biggest life insurance company in the country. If you live in India, there is no way, you haven’t heard about LIC. This life insurance company has captured 70% of the market share and is under the Government of India. In this, we are going to talk about LIC IPO, what it exactly is and what are the things we need to know before investing in them. So, let’s get right into it.
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” —Robert Kiyosaki
LIC IPO is LIC’s Initial Public Offering where they are offering shares of LIC as the Government has decided to sell some of its stakes. Recently LIC made headlines after submitting Draft Red Herring Prospectus (DRHP).
The Government of India has decided to sell 5% of its stake, therefore 95% stake of the company will remain under the Government. Among the public offering, 35% will be booked for the retail investors, the other 5% for the employees of LIC and 10% will be reserved for the policyholders.
Things You Need to Know Before Investing In LIC IPO
Investing in something is a very important decision that one has to take; you have been very clear and careful before doing anything related to this as it is about the financial security of your future.
As per the information, LIC policyholders who got their policy on or before the 13th of February, 2022 are eligible to invest in the 10% of public offerings that is reserved for the policyholders.
If anyone wants to be eligible in the quota for the policyholders, their PAN has to be linked with their policyholders. Those who have already linked their policyholders with their PAN on or before the 28thof February 2022 are eligible for the 10% quota.
Policyholders who have their Demat account are eligible for the 10% quota.
As 35% are reserved for retail investors, it means anyone who is not a LIC employee or a policyholder can apply to this quota. Policyholders, as well as employees of LIC, can also apply to this quota.
A retail investor is allowed to invest max to max INR 2 Lakhs, not more than that in their quota of LIC IPO.
LIC policyholders are allowed to invest INR 2 Lakhs under their quota of IPO.
LIC Employees are also eligible to invest a maximum of INR 2 Lakhs under their quota of IPO.
A policyholder who is not a LIC employee can invest a total of INR 4 Lakhs that is INR 2 Lakhs in the quota of retail category and INR 2 Lakhs in the policyholder category.
A LIC employee can invest up to INR 6 Lakhs if they are also a LIC Policyholder. It means INR 2 Lakhs under the quota of retail category, INR 2 Lakhs under the quota of policyholder category and another INR 2 Lakhs under the quota of LIC employee category.
If policyholder wants to avoid getting their application rejected under the policyholder quota, then they must ensure that they are primary Demat account holder.
If there are joint policyholders then they can apply under the policyholder’s quota, if only they have separate Demat accounts.
LIC IPO will be open to the public in the month of April 2022. The total offering is 31.6 Crore shares. It is also said that LIC employees and policyholders are eligible to get discounts on the floor price as well.
Conclusion
LIC is one of the biggest insurance companies in India founded in 1956 and is completely owned by the government. It is one of the most awaited IPOs since the launch of Zomato, Nykaa and Paytm IPO. It is expected to be one of the biggest IPO launches. People are eagerly waiting for LIC IPO so that they can invest in it.
FAQs
Who are the shareholders of LIC?
The government of India is the major shareholder and will remain the majority shareholder of LIC, only 10% is being sold to policyholders.
When will LIC IPO launch?
The LIC IPO will be open to the public on March 11, 2022.
How can I buy LIC shares?
If you’re a retail investor you can buy LIC shares using your UPI id.
IPO is a term that many of us are hearing nowadays. The ones who know about businesses and share markets are familiar with it. But few still don’t know what IPO is.
It is simply a process that makes a private company become public. Investing in IPOs can be a lucrative option to earn great financials in the future.
IPO investing does seem a good idea to almost everyone. However, it might not always be successful. It is important that you are a well-informed investor who knows about this world.
IPO has a way of working in India. The entire process gets monitored by SEBI (The Securities and Exchange Board of India).
IPO stands for Initial Public Offerings. As the name suggests it is a process that makes a company available to the public so that they can buy a share of it.
Any company with any type of business, size, or time of existence can get itself listed for being public. IPO simply helps a company to earn funding through public.
The company shares gets available to the public after initial public offerings. Investment banks help the company with the IPO process. The money raised through IPO enables a business to grow further. This in turn helps the shareholders to gain profits.
About IPO Process
How IPO works in India?
When a private company needs huge capital which is way beyond its reach to raise, it resorts to other measures. One of the best and lucrative options is to ask the public for investment through IPO.
A company can sell the shares itself, but this makes the process highly taxing. So, companies tend to hire investment banks to take care of the entire process.
The process of IPO in India involves the following steps:
Step 1
At first, the company creates an agreement with the investment bank. This includes the aimed amount to be raised, security issues, and other details about the process.
Step 2
Then they register a statement to the Securities and Exchange Board of India. The statement is then approved by SEBI after proper examination.
Step 3
After the approval, the company finalizes the shares to be sold to the public. It also finalizes the price for it.
IPOs are available in two issues. These are fixed price and book building. In the former, the company creates a fixed price for each share to be sold. In book building, the company provides a range of prices. The people then place their bids within the range to get a share.
Step 4
After the price fixations, the shares are available for the public. The interested people then submit their applications for the shares. Then after scrutinizing the applications, the company’s share allotment begins.
Step 5
The final step is the listing in the stock market. When the public investors receive their share, they are then listed in the secondary market.
How Does IPO Price is Decided in India?
In simple words, it is decided by dividing the entire value of the company by the number of shares in the listing.
The total number of orders received for shares and maximization of the trades to be executed at the time of stock exchange launch makes for the listing price.
Top IPO Listings and Funding India 2021
Zomato
The online food delivery company, Zomato gained huge popularity with its IPO listing. The date of listing was 23RD July 2021. The issue price was Rs.73. The current BSE and NSE prices are Rs.132.70 and Rs.133.70.
Public offerings helped Zomato raise Rs. 9,375 crores. Its debut in the share market turned various heads around.
Nykaa
Another popular IPO listing of the year 2021 is Nykaa. The beauty and wellness e-commerce company was listed on 10th November 2021. The issue price was Rs. 1,125. The current BSE and NSE prices are Rs. 2,063 and Rs. 2,018.
The company raised funding of Rs. 5,352 crores through the public offerings.
Paytm
The Indian digital payments and technology platform’s IPO listing date was 18th November 2021. The issue price was Rs. 2,150. The BSE and NSE prices are Rs. 1,955 and Rs. 1950.
Paytm raised Rs. 8,300 crores through initial public offerings.
MTAR Technologies Limited
MTAR Technologies, the engineering solutions company’s listing date was the 15th of March 2021. The issue price for the share was Rs.575. The current price at BSE (Bombay Stock Exchange) stands at Rs. 2236.95 and NSE (National Stock Exchange) current price is Rs. 2237.95.
After the sales of shares, the company gained Rs. 179 Crores through IPO.
Easy Trip Planners Limited
Easy Trip Planners or EasyMyTrip is the online Indian travel company found in the year 2008. EaseMyTrip got listed on 19th of March 2021. The issue price of the share was Rs.187. The current BSE price stands at Rs. 520.25 and NSE price is Rs. 593.85.
The company got the funding of Rs. 229 Crores after selling the shares to the public.
Paras Defence and Space Technologies Limited
Paras Defence and Space Technologies Limited deals in engineering products and solutions. The listing date for the company was 1st October 2021. The issue price was Rs. 175. The current BSE and NSE price stands at Rs. 732.4 and Rs. 732.9 respectively.
The company earned funding of Rs. 51 crores through IPO.
NURECA, the health and wellness products company’s listing date was 25TH February 2021. The issue price was Rs.400. The BSE and NSE current prices stand at Rs. 1390 and Rs. 1390.4.
The company received funding of Rs. 44.55 Crores through initial public offerings.
Clean Science and Technology Limited
The company uses the latest technologies to manufacture specific chemicals. The listing date for the company was 19th July 2021. The issue price was Rs. 900. The BSE current price is Rs. 2481.65 and NSE current price is Rs. 2476.15.
Through IPO the company collected a capital of Rs. 464 Crores.
Latent View Company helps with the processes related to digital consumers. It got listed on 23rd November 2021. The issue price was Rs. 197. The current BSE and NSE price of the company is Rs. 491.55 and Rs. 491.3.
The company received the funding of Rs. 267 Crores through IPO.
Laxmi Organic Industries Limited
Laxmi Organic Industries Ltd. is the chemical manufacturing company. The company was listed on 25th March 2021. The issue price was Rs. 130. The BSE current price is Rs. 396.45 and the current NSE price is Rs. 396.5.
IPO listing helped the company to raise funding of Rs.180 Crores.
Conclusion
The IPO market in the year 2021 has seen a great amount of growth. Many startups like Zomato, Nykaa, Paytm have entered the unicorn club through IPO this year.
IPO investing has two sides. It can be super flourishing but also a doorway to loss. So, it is necessary to do proper research about the company and the market before investing. IPO is a lucrative way that makes for company growth by making it available to the public.
FAQs
How many IPO are there in 2021 in India?
As per data by BSE, a total of 63 Indian companies went for IPO in 2021.
Which IPO is the biggest IPO in India?
The listing of LIC is considered to be India’s biggest ever IPO.
What are the top IPO funding in 2021?
Some of the top IPO Listings and Funding in India in 2021 are:
Ankit Kedia is the Founder of Capital A, a new-age venture capital firm for early-stage startups in India. He launched the fund formally in 2021 after having spent the last 14 years as a second-generation entrepreneur in his family business – Manjushree Technopack Limited. Ankit has been angel investing since 2017 and Capital A is the formalization of this passion and his USP as an angel investor turned VC. He comes with a rich operating experience across the B2B space including in verticals like manufacturing, supply chain, healthcare, MedTech, fintech, and others.
At Capital A, the team is on a mission to back meaningful startups and founders looking for smart capital instead of just going after the valuation frenzy. They have also backed consumer startups with a solid product-market fit and impact. Their focus is on highly promising Indian startups across different industries and it has made 20+ investments over the last six months of its existence.
The following is an excerpt of the interview with Mr. Ankit Kedia, Founder & Lead Investor, Capital-A.
1. How was the year 2021 for you as an investor/VC?
The year 2021 was a solid one for investors. We saw an incredible amount of VC Capital being deployed across a highly diversified group of sectors. As far as Capital A is concerned, this was our maiden year and we have invested in over 20 early-stage startups across different sectors and have more in the pipeline for 2022.
2. How often do you bet on the entrepreneurs and not on the ideas? And when/if you do that, what quality of the entrepreneur usually makes you do that?
Given that we are an early-stage focused VC fund, we always end up in a dichotomy of choice between the founder and their idea. There is no binary answer for this. We have made bets on founders who are fresh out of college but come with great execution capability and zero experience. We have also backed seasoned professionals beginning their start-up journey after 10+ years of industrial experience.
Typically, we look for founders who have absolute clarity in their ideas and basic commercial acumen. If both these qualities exist in them, it is easier to assess the business. This is because we are assured that the founder knows their territory well. While an educational qualification from top business schools and engineering institutes is good, we have never used this as a prerequisite for evaluating investment opportunities.
3. What is a warning sign for you when investing in a startup?
If the founder keeps wavering on his/her product idea and wants to pivot even before having secured seed funding, it usually is a red flag. Another aspect that we carefully evaluate is the future-proofing of the business model in terms of technology and scalability. If either of these isn’t likely to exist in the next 5 years, we tend to hold off any further discussions.
4. What are some common biases you find in the Indian Startup ecosystem?
While investing, many VC founders are most likely to pursue the crème de la crème from IITs and IIMs who they feel are capable of executing and scaling up to large businesses. In my view, we need to look beyond this bias and consider those from the non-premier institutes as well to democratize the startup ecosystem. Another bias which many early-stage investors have is that they tend to back founders and startups with other bluechip angels or VCs as their investors. While this is a good background, it displays the lack of understanding and belief of the incoming investors. It also displays a piggyback approach towards investing. Although we also consider such startups, only a small percentage of our fund is reserved for Series-B investment.
5. What are your views on the Shark Tank India Episodes until now?
The Shark Tank show on Sony TV is an incredible start and will be a great way to get more and more entrepreneurs into the startup ecosystem. I love the section in which the sharks explain various VC jargon to viewers. From an investor’s point of view, I would like the producers to tighten the quality of startups pitching to the sharks and not just select those who are vying for publicity on national TV.
6. We are seeing many startups exiting with IPO, what’s your opinion on that? How is it going to change the ecosystem?
India’s startup sector has seen a record number of IPOs in 2021. The reason is quite simple. There is a lot of pent-up appetite for investment amongst global investors. Many companies are also looking at leveraging the stock markets that are bullish about a strong recovery from the pandemic to fund their expansion plans and achieve financial security. The ecosystem will see an enormous amount of global capital being poured into the startup space in India. The pandemic-induced lockdown led to a record high adoption of digital technology, thereby helping startups fuel their growth. There is a renewed confidence amongst the investors and IPOs will become a realistic exit option for investors.
7. More than 42 unicorns in 2021. What do you think caused this wave? Is the valuation justified according to you?
India stands among the top 3 countries (behind US and China) witnessing a surge of unicorns. This surge can be explained by the massive interest from global investors aspiring to secure their territories within the Indian startup ecosystem. Some innovative startups amongst the unicorns including Zetwerk and Apna which made it to the list due to their offerings. There are a few unicorns that commanded ridiculous valuations. In my opinion, they were just fortunate to be in the right place at the right time.
8. How can we support/ enable entrepreneurs in tier2 and tier 3 cities?
Tier-2 and Tier-3 cities have very innovative founders and business ideas. However, they sometimes lack the right connect, platforms, incubators, or accelerator programs to bring them to the forefront. In fact, many founders focus on solving problems specific to Tier 2 and 3 towns which could be a very big gap in the market. In my opinion, VCs should identify the right venture partners to find out these hidden gems and also actively partner with academic institutions to develop student interest in the startup ecosystem.
9. What do you look forward to as an investor in the year 2022?
The year 2022 will be similar to 2021 or even better as startups continue to attract capital from both private and public markets. The year 2021 saw one of the highest investments both from PE as well as VCs with many startups also going to the capital markets. The IPO frenzy has injected a lot of confidence among investors and startups will continue to benefit from the pent-up demand from 2020.
10. What are a few sectors you think would be hot in the upcoming year?
Sectors like EV, e-Commerce, logistics, and even fintech will continue to be the flavor of the seasons amongst the VCs.
11. One learning that you would like to share with founders who are looking to raise funds?
One of the most common challenges that we face with founders looking for capital today is that they underplay their equity without understanding how valuations and captable work. The founders end up giving a lot of equity to investors who barely bring value to the table other than wanting to spray and pray. Any founder looking for early-stage smart capital must be equally selective about their investors as much as the latter cherry-picks investment opportunities.
Another challenge many founders are facing today is around individual investors on the captable who become extremely specific about their exits. In some cases, we have also seen their rigidity to sign on SHAs as they are entitled to the same rights as major investors. My advice to founders is that while your friends and family are one of the earliest believers in your ideas, it is very important to anticipate future rounds and draft agreements in the interest of your organization, and not the investors. Sometimes, the fundraising process can become very overwhelming, and hence, it is important to create a healthy mix of advisors, investment bankers and leverage early investors as your mascots for the same.
Everything is business. Well, it is true, just look around you and you will see multiple examples of a corporation selling something. We are all covered with businesses and it is efficient.
Having businesses is efficient because it provides us with things that we want. In other words, they provide us with something of value. Otherwise, we would have to make everything on our own which would be inefficient and time-consuming and practically impossible. So businesses make markets efficient and society a better-managed entity.
When a business turns big, I mean really big, then it needs to scale accordingly. Scaling in India is a very hard process because of different types of people everywhere. Most companies are primarily limited in nature and at their inception. This means that they operate mostly on private capital but at some point in time they need more funds than their private capacity. Thus, when a company successfully pulls off the magic of scaling then happens the true magic. It goes on and lists itself as a public limited company that now can make money from people to scale and fuel other activities.
Not to mention, the listing process may seem easy and simple, the fact is that it isn’t. This is an article about how a company lists itself in India. There are majorly two important exchanges in India, namely NSE and BSE. Read on to find out how a company is listed on NSE and BSE.
Every company which operates in a market of high demand has a good scope of growing and scaling. From the inception of a company, most companies are privately limited. Private limited means that these companies are funded privately, or the source of the capital is just normal private people or organisations behind the promoting chair. Hence, they operate on a limited capital that they can privately afford to fuel the operations at that company.
Some companies, however, go ahead and become big national companies that need huge cash flows to fund their activities. At the point when companies become big and quite popular in a nation, the promoters or the chair people will be needing more capital.
There can be many sources of funds to be considered, as a loan, or issuing debentures or selling stakes etcetera. One of the most famous ways to raise capital is to list the company on a stock exchange.
In corporate finance, a listing refers to the company’s shares being on the list of stocks that are officially traded on a stock exchange. Thus, listing means that anyone from the public or a retail investor can now take part in a company by buying its shares. The general public will be buying a company’s shares to earn capital appreciation or dividends.
Why do Companies Go Public?
A very valid question that may arise in your head is, why do companies go public? There can be many reasons why a company chooses to go public. It depends on the entrepreneur running it on how he/she is willing to go about raising funds. The most common and eligible reasons for a company to go public and the list itself is given here –
Fund Capex from internal accruals
Raise a Series of funding from another PE (Private Equity) fund
Raise debt from bankers
Float a bond (this is another form of raising debt)
File for an Initial Public Offer (IPO) by allotting shares from authorised capital
A combination of all the above
Let us go into some detail about how these reasons arose in the first place.
Capex requirements
Let us first understand the term Capex first. Capex is made up of two individual words, that are capital (Cap) and expenditure (ex). Capital expenditure is that form of expenditure that is required to fund the management and acquiring of fixed assets. Fixed assets are those assets that are fixed in nature that will pay benefits after a year or so. Thus, capital expenditure is spending money on fixed assets that are not to be converted into cash quickly.
They include land, building and machinery. So we can conclude, Capex expenditure is the expenditure that a company incurs for growth in business. This long term growth expenditure has to be fuelled from somewhere, that is why companies go public.
Provide an exit for the company’s early investors
After the process of listing is done, the shares of the listed company go around in the market and are traded freely. When this situation arises, any existing shareholder can exit the company by selling his/her shares. That existing shareholder could be one of the promoter, anger investor Private equity funds or venture capitalists.
They can use this opportunity to sell their shares in the stock market. Thus, by selling the shares or stake that they own, they can exit the venture and thus exit the initial investment they made in the company. However, they can also choose to sell shares in multiple parts and slots. There have been many successful and famous exits in India like that of Kunal Shah from Freecharge.
Just ~4 years ago $~450M of @FreeCharge was largest internet exit.
When a company chooses to go public, it avoids taking any sort of loan. The reason is that taking loans is hefty work, it also comes with much financial burden and high-interest rates.
So many entrepreneurs refer to selling stakes or ownerships in the form of shares. The best way to do that is to be listed. The listing makes a company’s shares trade freely in the market and makes space for funds that the company needs to grow. That too happens without paying any form of interest and any other sort of financial charges.
Reward employees
There is a thing called “Employee stock option plan” or ESOPs. They are awarded to employees who are early in the venture and/or are outstanding with their work. They work as an incentive for employees who work really hard to make a successful venture.
Once the company is listed and shares start trading freely, it makes space for more ESOPs. They are awarded to employees to keep the work motivation high and construct a better work environment. A few examples where the employee benefited from ESOP would be Google, Infosys, Twitter, Facebook etc.
Improves clarity
As a company goes public and gets out of its private cocoon, it raises its status. Being a listed entity in a stock exchange is definitely not a small thing, it makes the company stand in the limelight of investors. Which interests people more in getting to know about that company. This will eventually create a positive impact on the company in its future prospects.
What is a Stock Exchange?
When we discuss ‘listing’ and all the technicalities of listing, it is extremely crucial to talk about stock exchanges. Whether you are a person trying to list your company or a person willing to invest his/her money with the company, one entity that you both have to work together with is the stock exchange. So, what is a stock exchange?
Let us take one example to know clearly what a stock exchange is. Imagine the Kirana store near your house, or a supermarket or a shop of essentials that has a lot of items in its store. Just like a Kirana store is a store for items, a stock exchange is a marketplace for equities. It is a place where buyers and sellers come together to complete trade and settle transactions.
The stock market is where everyone who wants to transact in shares goes. Transact in simple terms means buying and selling. It is impossible for a stock to be traded without being listed on the stock exchange. Thus, the main purpose of a stock market is to facilitate equities trading.
Trading is buying and selling of securities. In India, there are two main stock exchanges. The names of these stock exchanges are National stock exchanges and Bombay stock exchange. Let us read a little about them.
National Stock exchange
NSE was incorporated in 1992. It was recognised as a stock exchange by SEBI in April 1993 and commenced operations in 1994 with the launch of the wholesale debt market, followed shortly after by the launch of the cash market segment. IT is the leading stock exchange in India. Located in Mumbai, Maharashtra and is owned by some leading financial institutions, banks, and insurance companies
Bombay stock exchange
BSE was established in 1875. It was Asia’s first and the fastest stock exchange in the world. It is called the fastest stock exchange as it operates at a speed of 6 microseconds. It was established over 143 years ago, and BSE has helped the country to grow its capital market by ensuring a smooth flow of equities. Though it is now known as the Bombay stock exchange, it was established as “The Native Share and stockbrokers association” in the inception year of 1875. In 2017 BSE became the first listed stock exchange of India.
The Process of Listing (Initial Public Offering)
Now we will discuss the cherry of the cake, the process of listing. It is also known by the name of initial public offering because it is the first time (Initial) when the shares will be offered to the public. This is a very strict process and both the National and the Bombay stock exchange take it very heartedly. It goes without saying at this point that the company which is trying to list itself has to follow dedicated guidelines of the desired exchange. However, the most common checkpoints to be ticked are listed here –
Appointing a merchant banker
Merchant bankers are also called Book Running Lead Managers (BRLM)/Lead Managers (LM). The work of a merchant banker has diverse actions. It includes conducting some efforts to check all the legal compliances at the company filing for the IPO and issuing a due diligence certificate.
The Lead Manager has to work closely with the company to prepare the DRHP. DRHP stands for draft red herring prospectus. He also has to underwrite shares, which is agreeing to buy all the unsold shares. He then has to help the company to reach a decision on a reasonable price band of the offering. Thus, these are all the major functions that a merchant banker does.
For example, The merchant banks (book running lead managers) for the issue are Morgan Stanley India, Goldman Sachs (India), ICICI Securities, Axis Capital, JP Morgan, Citigroup Global Markets India and HDFC Bank.
Applying to SEBI with a registration document
Not to mention that everything at a listing is done through the rules of the securities exchange board of India. After getting the work done by a merchant banker, you have to pitch a registration document to SEBI. That document should contain what the company does and what is the motive of the listing along with all other mandated information. After all the process, the company should look for an affirmative response from the regulating body to go ahead and issue a DRHP.
DRHP
DRHP of Zomato
DRHP stands for Draft red herring prospectus. It is a disclosure document that describes information about the IPO to the general public. It contains a lot of information about the company and the issue price and that is often too deep in finance terminologies. The most important and imperative information that is present in a DRHP is as follows –
Estimated IPO size
Everything about the shares that are to be issued
The risk involved in the business
Why the company wants to go public and how does it plan to utilise the funds
Revenue model and all sorts of expenditure
Complete financial statements
Management relevant information
Marketing the IPO
After DRHP is issued and is made public, it is important to float some marketing about the IPO. The company would want to reach the maximum audience of investors for the purpose of its public offering. So they take support of print media and other sorts of media to market the IPO more.
Fixing the price band
Fixing the price band is super imperative when preparing for an IPO. The price is the only number which the people would see first. So, it is important to set the number not too high and not too low to attract the right amount of people on the board of directors. This is helmed by the existing shareholders and is helped by experts like merchant bankers. Once the price band is fixed, that becomes the base on which the company is listed on the stock exchange.
Book building
Book building is the process of capturing and recording investor demand for shares. For example, if the price band is between Rs.100 and Rs.150 then the public can choose. They can choose what is the right amount per share that the company deserves. The process of book building is to collect these price points along with respective qualities of shares and demand. Book building is perceived as an effective price discovery method.
Closing date
After the book building process is done and completed, it is said as the closing date. Generally, it is open for two to three days and maybe more in some exceptions. Thus, then the price point is selected which has the most bids from investors. That price becomes the listing share price of the company.
Listing day
Paytm Listing Day
Then comes the day when the company actually gets listed on the stock exchange. That becomes the day when the shares start to be traded freely in the market.
When the shares are being bid, they lay a foundation for future selling values. This happens when investors choose the desired price from the given price band. This whole arrangement around the date of issue is known as the “Primary Markets”. After the initial bidding has stopped and the stock gets listed on the stock exchange, the share starts to trade normally like any other listed company. This situation in this share is known as the “Secondary Markets”.
Once the stock transitions from primary markets to secondary markets, it gets traded daily on the stock exchange. People start buying and selling the stocks regularly and normally like any other company.
Prerequisites for Listing on National Stock Exchange
There are many checkpoints that one has to fulfil before getting listed. Some of the most needed and crucial prerequisites are –
The paid-up equity capital of the applicant shall not be less than 10 crores and the capitalization of the applicant’s equity shall not be less than 25 crores.
The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956/2013, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.
Prerequisites for Listing on Bombay Stock Exchange
There are many checkpoints that one has to fulfil before getting listed. Some of the most needed and crucial prerequisites at the Bombay stock exchange are –
The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as “the Company”) shall be Rs. 10 crores for IPOs & Rs.3 crore for FPOs.
The minimum issue size shall be Rs. 10 crores.
The minimum market capitalisation of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price).
Conclusion
In this article, we got to know why a company goes public, the needs that make a company think about listing itself. We read about the stock exchanges in India. The two most important exchanges are the NSE and BSE, the national stock exchange and the Bombay stock exchange. They lay the foundation of stock markets in India. Then we read about the process of how a company is listed in a stock exchange.
After all these discussions, we can say that companies get listed, mainly to fund their Capex (Capital expenditure) requirements. This helps a company grow and get out in the market of more people. If you want to invest in a fresh new IPO then you must read the DRHP that is the draft red herring prospectus. It is super important for an investor to know where he is investing. In this modern world, one thing to make sure of is that your money should grow faster than inflation.
FAQ
What happens when a company gets listed?
When a company gets listed it can raise additional funds by issuing its shares on the stock market.
Can a private company be listed?
No, a private company cannot go public. It will first have to convert itself to a Public Limited company, then only it can be listed on the stock exchange for trading its share.
How long does it take to IPO?
The IPO process depends on many factors but it typically takes six to nine months for the company to complete its public debut.
The intrinsic need of every human is to live a comfortable life. Leading a comfortable life is not easy if you don’t have some resources. It is important to note here that peace and comfort are not googleable. You need to do something to make your life a smooth sail. So that you have enough resources.
Speaking of resources, one of the most important resources is money. It is a battery for storing value. The more you have it, the more free you will(feel) be. And mark my words, “freedom” is the ultimate flex.
So to amass more of it, we people do many sorts of things. Some do business and others work for other businesses. If you look into the recent past you will notice how ‘investing’ as a domain has risen many folds. How people all over the internet are making portfolios. How stock market participants are rising. How everyone is hoping to get that IPO allotment. All these are examples of people trying to create some more income. Income leads to freedom. Not to mention how the “financial freedom” phrase gained momentum recently.
Getting into stock markets has been a fad for more than a year now. Chasing IPOs is another fad for some young investors. There is an intrinsic trait of IPOs that interests everyone. The hype of listing gains. Quick profits and the first come badge. A recent hot chase was the huge Paytm IPO. Which didn’t go well. This is the article about that failure and the behemoth PayTM. Read on to see through.
Have you heard this term before? Fin-tech is a word derived from amalgamation of finance and technology. This could be named as the word of the decade. You won’t ask the reason for this, because you probably know it already.
As the technology sector is rising, lines between companies are blurring. So much so that I would say that every company is a technological company now. With gaps blurring between sectors, the financial sector is the next most diffusing sector. It is hugely automated and also supported by countries’ governments. For example, in India the government is promoting digital payments after the demonetisation. This is a good boost for online digital payments companies, UPI (unified payments methods) and the like.
A Brief about Paytm
Paytm is a name that needs no introduction. The name is just enough. It is a leading digital payments company that is digitalizing India. Not to mention the immense support that the company is being provided by the government. Not only this, Paytm started the digital revolution in India.
From that, they became the leading payments app in the second most populous country in the world. Today, to the north of the 20 Million mark, merchants & businesses are powered by Paytm to Accept Payments digitally. This is because more than 300 million Indians use Paytm to pay at daily stores. That’s not all, the Paytm app is used to pay bills, Send money, do Recharges to friends & family, Travel tickets & Book movies.
The goal as the company mentions is to get unregulated businesses in the economy to the mainstream economy. Taking most of all the transactions happening in the country and enabling them digitally is an almost impossible thought. This is such a behemoth task but the digital payments provider is not looking backwards.
It recently was listed in the stock market. It was a huge IPO. Investors all around the world were excited. It is now the biggest IPO ever in the history of the stock market in India. Previously it was Coal India which raised about 15,000 crores. Paytm is now listing to raise 18,000 crores rupees.
Paytm has been a loss making startup for a long time now. It is not earning at all. The startup has losses of about 4000 crore in FY 2019. That went to 3000 in FY 2020 and then to 7000 crore.
Even though the losses are declining, this doesn’t hide the fact that the company is not earning at all. So why is that? Why a loss making company is valued so much. It is valued at over 16 billion dollars. Moreover it is able to raise money from big VCs. Asset management companies are pumping money into this loss making startup.
The reason why the company is left with such abundance of money is that it is a startup. An immensely successful startup. Which tries to get customers first, that is to capture a large market share.
After getting a good chunk of the market, they will monetise themselves and earn ridiculous amounts of real cash. This is how most startups model work. They hack growth and become big organisations. They try to establish a strong company and reduce the time that is required to build a strong company.
The startup has also already raised 8000 crores in its anchor round. Its initial public offering of Rs 18,300 crore. Top sovereign wealth funds around the world, financial investors such as Canada’s CPPIB, Singapore’s GIC, Alkeon Capital, BlackRock, Abu Dhabi Investment Authority are among those to have picked up stakes in this fintech.
The parent organisation of Paytm is One97 communications. Other than recent fundraising rounds, One97 communications has shareholdings by top capitalists and Asset management companies. It has a 2.8 percent stake by Berkshire Hathaway, the company of world’s best known investor Warren Buffet. It has Ant group as a shareholder, that is as a subsidiary of Alibaba, founded by China’s richest man, Jack Ma.
The promoter or the Chief executive officer of the company Vijay Shekhar Sharma has a stake of around 14 percent of the whole mammoth organisation. Other notable shareholders include Alibaba itself, Softbank, Elevation Capital. With all these big supporters this company recently filed for an IPO.
The IPO was huge and reportedly the biggest that Indian markets have ever seen. Unfortunately, The public offering of Paytm fell down immediately after the listing. In fact today is the second day of the shares trading in the market. They went as low as 37% since the IPO.
Let us discuss the whole public offering scenario in minute detail.
Paytm Initial Public Offering (IPO)
Initial public offering is the offering of shares to the general public. General public here means retail investors and big investors as well. When it happens for the first time, we call it the initial public offering. Accordingly it can happen second or third time also, in that case we will call it FPO or further public offering.
IPO or any public offering happens when a company decides to take money from general people and not raise more rounds of funding. The money is needed to fuel growth. It is needed to scale the enterprise and thus the money becomes the new capital.
In Paytm’s case, the company wanted to raise a little over 18,000 crores. This is the biggest amount ever raised in India. So the Paytm IPO is expected to be the biggest offering in Indian markets yet. The breakdown of the total money is that, 8000 something crores were new offering of shares. So, they were a fresh issue. And the remaining 10,000 crores were offered for sale, that is existing shareholders selling their share of stake. The price band of the shares ranged from 2080 to 2150 rupees per share. The valuation of the company at the time was about 1.5 lakh crores.
The RHP is a legal prospectus for every new listing company. The red herring prospectus (RHP) of this company said that it expects to incur losses for more years before it starts making profits. The opening IPO date was 8th of November and the last date to apply was 10th of November. Face value of the share was One rupee. So it was going to be listed at a premium.
Paytm Share Price
Paytm Listing Losses
The Paytm IPO was subscribed only 1.89 times on Nov 10, 2021 17:00. The public issue subscribed 1.66 in the retail category, 2.79 in the QIB category, and 0.24 in the NII category. It shows that investors weren’t much interested in it or the IPO was so big that it just covers up all the demand.
Paytm shares fell down by about 10.35% to Rs 1,402 against previous close of Rs 1,564.15 on BSE. Market cap of the company, which remained above the Rs 1 lakh crore mark on the listing day, faced down to about Rs 93,490 crore on the first listed day. This loss making startup is acting like a money guzzler.
Paytm IPO Reviews
Here are some reviews of the IPO from major and big fund coordinators and Asset management companies.
International Brokerage firm Macquarie published a report on Monday. A second report on Paytm, maintaining its earlier target price of Rs 1,200 and an ‘underperform’ rating after its first one on listing day, ruffled the feathers of investors. This means that they concluded that the price of the share should be Rs1200 and the listed price is well overvalued.
On the second day it went down to 40 percent. Exactly to the price what Macquarie anticipated but they released it after Paytm was listed on the stock market.
After the first day listing loss, investors panicked and tried selling this. This is a huge reminder that if you pick up a stock or an IPO to invest, do your own research. After an honest report only should you consider investing.
Mobikwik whose IPO was in the turn later in time also postponed their listing. Witnessing huge losses that investors incurred in Paytm’s IPO. Let us see some of the anticipated reasons that we all can see which led to the downfall of Paytm on the very first day of being listed.
Anticipated Reasons for the Downfall of Paytm IPO
Some of the most common seen and anticipated reasons for Paytm losing value are listed here. Let us figure out why this mega IPO is seen as a loser in the race for listing gains.
Overall Market Conditions
The current market conditions are also somewhat affecting the IPO listing. The current market trends show a downward trend. Today, you can see news of the market falling down 1170 marks. The day’s loss was the biggest for the index in over six months.
This downward trend of Sensex is mainly due to Reliance sliding down 4.4% after it announced reviewing of a recent deal. Outside India and around the globe, inflation tension is rising and so are the Covid cases in Europe. All these activities have also in some sense affected Paytm’s downward trend. It is at about 37% down now from the listing day.
Paytm’s Financial Situation
If you have invested in Paytm looking at the fundamentals then you know for a fact that Paytm is not going to make profit anytime soon the profitability game is slightly a long way ahead. We still don’t know when Paytm will become profitable.
Another fact is that the newly listed companies right now are also trying to be very smart because they know that there’s heavy retail participation in the market. A lot of people like me and you will go for listing gains so Paytm came out and did a mega IPO which was 18,000 crores.
Size of the IPO
Listing gains comes when supply is short and the demand is quite big. In layman language, when the offering is small, listing gains are expected. In Paytm’s case, the IPO is so big that it covers the overall demand and it leaves no space left for a force to push the price up.
The Paytm IPO was subscribed 1.89 times on Nov 10, 2021, 17:00. The public issue subscribed 1.66 in the retail category, 2.79 in the QIB category, and 0.24 in the NII category. So you see all the demand was covered with the hugeness of the IPO and less space was left to pump the price up.
What should you do if you have bought Paytm’s Share?
If you are someone or you know someone who is stuck with this stock. I would suggest two options. First is to just get rid of this stock as quickly as possible. Second, if you are an investor with a long term horizon then you can consider holding this stock. But keep this in mind that this stock will take a good amount of time to go profitable.
The reason is as we discussed earlier is that the company is making consistent losses for now. It also is forecasted that the company will only scale for now and it has no immediate plans to bring the profit perspective to the table.
As of now, the company is down to 30-40% and it is going to take time to take back these percentages of losses, only then one can expect some profits. Again if you are looking for quick listing gains, then maybe this might not be the probable right stock and time to stay invested in this stock.
For all the inventors who didn’t apply for this IPO this is the right moment to be aware of such scary situations. It is always best to research before you invest your money. It is really a scary situation when you invest in a big loss making startup, and you are stuck in it. Startups can be a blackhole for money for a very long time.
Conclusion
The reason for such a hype of this fintech company being listed is that, India is the second most populous country in the world. China, the top populous has already had their share of the fintech revolution. They are also harsh on regulations. Now it is India’s turn. India is the next hub for investors that may be domestic or foreign.
Digital payments are expected to grow up to 5% in the next five years. Digital commerce will likely move up to 3.3%. With these things in store, India becomes the next hot spot for investments.
Jio and digital revolution boosted the Paytm business. Demonetisation skyrocketed it. Their tagline “Paytm karo” became a household thing during these times. With the government promoting digital economy and cashless transactions, hope is high for fintech revolutionaries like Paytm.
The listing losses taught many people to do their own research before investing anywhere. The company is expected to take a long time to jump to profits.
Whether Paytm will change Indian payments face or it will dissolve, this is to be seen and only time will tell. One thing is for sure, it has massively added to the cashless economy that the world is striving towards.
FAQ
What is Paytm IPO?
Paytm is a digital payment system, the company lunched its IPO in Bombay Stock Exchange with largest initial public offering (IPO) with the value of Rs 18,300 crores.
Why did Paytm IPO flopped?
Some of the common reasons why Paytm IPO flopped was Overall Market Conditions, Size of the IPO, and Paytm’s Financial Situation.
At one point while growing a startup, every startup founder must have dreamed of is applying for an IPO. Who doesn’t wants some extra funding to grow their startup?. The Indian startup industry is growing at a fast pace. And Many startups are buckling up to apply for the IPO. But why now? Why are so many startups going public in 2021?. Let’s find out
If you are just as curious to know, follow the article
So, you hear this word floating in and out of conversations, much to an extent these days.
Startups are usually founded by one or more entrepreneurs and their company is in its initial stages of business.
These entrepreneurs involved in building startups believe that there is a demand for a certain product or a service and want to make it better by developing it.
The funding for these usually involves getting money from family or friends.
Startups need capital, so they are also on a lookout for backers to invest in them.
What is an IPO?
IPO stands for Initial Public Offering
Companies need capital, so they raise it in the forms of IPO and shares from public investors.
People have a point of view that stock prices increase after an IPO.
Following factors you can consider before going Public
The company has been financially strong for the last three years and is making good profits.
You hear about your company quite often.
The company holds a strong vision.
We are observing a trend here. Not only Indian tech startups are going public, but almost every startup is getting in the waiting list to go public in 2021.
The way for this money is paved to the path of the financial markets, mainly stocks. Now that means many of the giant institutions have plenty of money floating in so that they can invest in. Which leads us to another question: Where? These institutions now have the power to invest in IPOs.
Startups like Zomato, Nykaa, PayTM, Delhivery, some of which have already been made public and some that are gearing to go public, have the intuition that they can catch the interest of these investors.
It is becoming, a regular thing now for public valuations to overtake the private ones. Many people chip in, thinking that what they invest in will see growth in the future. The shares are rapidly growing, so if your startup is waiting to go public. There is no better chance and time than now to grab the opportunity.
Possibilities of recovery
The other part of the story is that many say that with stocks going up to the skies. With the investors and the Indian public pooling in money for the vision, your startup holds even if you have landed into the mess of running into loss. There is a chance of new money coming in. And the value of your startup will be much more than you expected.
Registrations are easier than before thanks to SEBI (Securities and Exchange Board of India)
One of the other reasons is none other than the pandemic itself. It really shook up the world, bringing everything to a halt and slowing down many aspects of our lives. Seeing the stability and growth, the other startups are sure in a hurry to get themselves listed as soon as the pandemic did put a stop to the process. And it would not hurt to take advantage of the situation and accelerate it.
Mansi Maheshwari
