Paytm and Zomato force Delhivery and OYO to delay IPO plans

It looks like the technology and digital stocks, which were part of the IPO craze in the last few months, have suddenly fallen out of favour. It may be too early to say that the IPO book in India risks grinding to a halt, but that appears to be the broad message.

The big reason is the sharp fall in most digital shares post listing. It is not just about Paytm because other digital listings like Policybazaar, CarTrade, Zomato and even Nykaa have fallen substantially.

This sudden shift in sentiments has upset the plans of a slew of start-ups and this includes the likes of Oyo Hotels, Delhivery, PharmEasy, Droom etc. Most of them are now apprehensive that the anti-digital feeling could hit their valuations and their post listing performance.

This is forcing most digital IPOs in the queue to take a relook at their IPO plans. Both Delhivery and MobiKwik have put off their plans for the IPO for the time being.

For starters, it looks like the Indian investors (retail, HNI and institutions) are no longer enamoured of digital start-ups. The brief honeymoon appears to have faded as quickly as it started. One can argue that the likes of OYO IPO are delayed due to other legal wrangles including the one with Zostel, which is demanding a stake in OYO.

However, there is also genuine concern as Delhivery, PharmEasy and Droom are seriously rethinking IPO timing.

For instance, Delhivery has already pushed back its Rs.7,460 crore IPO to next fiscal year, i.e. after April 2022. Even in this case, it does not look like they would be keen to go ahead with their IPOs unless there is traction in the market and sentiments again favour the digital IPOs.

Delhivery is also reviewing its listing plans after SEBI was unhappy with the planned sale of a substantial amount of shares by investors in the IPO.

In the case of OYO, the SEBI approval is still pending but even with the SEBI approval it looks very unlikely that OYO Rooms would want to go ahead with the OYO IPO. For example, the valuation of OYO has come down to well below the last fund raising in 2019.

From $9.6 billion back then, OYO may have to now settle for a valuation of close to $7.5 billion in this IPO, eve in a best case scenario. That is not too enticing for OYO Rooms. 

Other potential IPOs that are also planning to delay their issues are API Holdings Ltd (PharmEasy) and Droom, which is an automobile agnostic market place. PharmEasy is backed by marquee investors like Prosus Ventures and TPG.

Droom, on the other hand, is backed by Beenext and Lightbox Ventures. Both these digital names are also looking to put off their proposed IPOs to ensure smooth sailing and better valuations in the market.

Interestingly, this has also had a negative spill over impact on Indian technology and digital companies that are now headquartered abroad. For instance, California-based SAAS provider (Druva) and Singapore-based mobile solutions start-up InMobi have decided to put off their IPOs.

Even Pine Labs is not going ahead with its IPO for the time being. Out of the Rs.70,000 crore proposed to be raised in 2022, other than LIC, majority are digital IPOs.

Certainly, the carnage in digital stocks like Paytm, Nykaa, Policybazaar, Zomato and CarTrade appears to have had a strong spill over impact on the potential digital IPOs. The next few weeks could be critical, although a hugely successful LIC IPO could make a whale of a difference to IPO market sentiments.

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