- Share prices of most new-age start-ups have been battered since the start of this year due to market corrections.
- A recent report by investment bank DC Advisory notes that these market corrections are likely to reverse by next year.
- A strong listing can even bring back the enthusiasm quicker
Zomato — which crossed $13 billion in market capitalisation last year — is now valued less than its unlisted rival Swiggy at $5.5 billion. Paytm — which was the highest valued start-up in India at one point at $18 billion — is now barely at $5.9 billion at the moment.
A recent report by investment bank DC Advisory noted that these “market corrections are not sticky” and were likely to come down as early as the first half of 2023. A strong
“A few positive events in the near future such as a strong listing for a digital-first company could have a domino effect and bring enthusiasm back to the market quicker than we all anticipate,” the investment bank said, while adding that the current market scenario has been a deterrent to companies planning to go public.
The year 2021 saw India’s young start-up ecosystem mature as ten
One of the highlights of 2021 was the listing of software-as-a-service (SaaS) company Freshworks which had a stellar debut on the Nasdaq, turning$4.
However, most of these companies, including Freshworks, have lost their spark in the stock market mainly due to market correction, business performance and the ongoing Russia-Ukraine crisis.
The disappointing market debut of Life Insurance Corporation, one of the most anticipated IPOs, and its continued underperformance, down 18 percent since its debut in May, has made more companies wary of going ahead with an IPO this year.
“Tech IPOs, which saw a frenzy of activity last year, have delivered a disappointing performance for investors. We expect limited movement in IPO markets in the near term as investors try to rebuild conviction on digital stocks,” DC Advisory added.
Companies like OYO, ixigo, Droom, Mobikwik, PharmEasy and SnapDeal were planning to go for a public listing this year and have already filed their papers with the Securities and Exchange Board of India (SEBI). Mobikwik and ixigo have also received an approval.
Mobikwik, in a previous $4, has said that it will wait for the right market conditions to go public.
Several stakeholders, investors and entrepreneurs have been girding for a funding winter that is expected to last anywhere between 12-24 months. The start-ups have already started laying off people, impacting at least $4 this year alone.
According to several experts Business Insider has spoken to, investors have a limited capital to invest and that is making them even more choosy. Industry’s biggest players, who already have heavy backing, may not face many hurdles in raising funds but smaller players may struggle.
Investors have also become strict about valuing businesses. Media reports suggest that e-commerce company Meesho has been trying to close another funding round at a valuation of around $4 but has not been able to find investors.
This tightening of the funding from venture capitalists (VC) and private equity (PE) is likely to spur a lot more mergers and acquisitions in the tech sector, the report added.
”We believe a shakeout within PE/VC deals in the tech sector was long overdue and expect a lot more consolidation in the market going forward,” the report said.
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