Last updated on July 30th, 2022 at 08:27 pm
What to know before investing in Tech IPOs?
Beginning of Fintech IPO euphoria
The second quarter of the year 2021 would be marked as the start of a new era of IPOs i.e. the Tech Company IPOs. The internet-based companies have become the talk of the town with their IPOs slated to launch soon. Zomato, an Indian start-up, and the major food aggregator is the first Tech based company to have launched an IPO creating a valuation of Rs 60,000 crore (at upper price band). Paytm and Mobikwik are soon to follow the league with DRHPs being filed with SEBI.
The technology companies have benefited as there is a global shift to work remotely which has resulted in increased demand for online services.
US market has already seen these tech listings like that of DoorDash in the year 2020 (Dec.) which has already seen good listings and the stock continues to perform well. DoorDash was available at a price band of $102 per share and currently trading at $167.36 per share. On similar lines, Airbnb listed at $146 per share (in Dec 2020) as against its IPO price of $68 and currently trading at $134.31. Though these companies cannot be compared on an apple to apple basis though one can draw reference from this.
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| Particulars | IPO Price (in $ per share) | Listing Price | Listing Gain | CMP (as on 19th July 2021) |
| DoorDash | 102 | 182 | 78.43% | 167.36 |
| Airbnb | 68 | 146 | 114.71% | 134.31 |
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Understand Tech companies before investing
These tech companies not only differ in the terms of their unique business model but also their growth has to be analyzed over a longer term. As they are start-ups, the financial strength of these companies may not be strong and they may have mounting losses at the time of bringing IPO. As happened in the case of Zomato, the food delivery giant though has grown leaps and bounds but it’s still to turn profitable. Thus, the main question that arises in the mind of investors is why should anyone invest in such a company? Well, these companies would have to be analyzed differently; the factors that would work well for these companies in the future are:
- Under penetration of internet users in India. The Internet penetration rate in India is 45% and thus vast population is still to be covered.
- Changing habits of the people like food habits, growing urbanization, and an increase in the working women population are positives for the tech companies.
- The growing scale of these start-ups would lower the transaction cost and stabilize fixed costs in the future.
Hence the tech stocks or IPOs have to be seen over a long-term horizon and their economic contribution is expected to turn positive as they scale up their business.
The pure technology companies like Route mobile and Affle India have given fantastic returns to the investors.
Tech IPOs coming up
Paytm: Paytm is the largest digital payments platform in India based on the number of consumers, number of merchants, number of transactions, and revenue as of March 31, 2021. Paytm” brand is India’s most valuable payments brand, with a brand value of US$ 6.3 billion, and Paytm remains the easiest way to transact across multiple methods.
Paytm is coming up with IPO of Rs 16600 crore comprising both fresh issue and an offer for sale. The IPO would value the company at $25 billion and it could be the largest IPO by a tech company.
MobiKwik– Mobikwik, based in Delhi is expected to launch its IPO of Rs 1900 crore. The company has already filed its DRHP with SEBI. It is also a fintech; one of the largest mobile wallets (MobiKwik Wallet) and Buy Now Pay Later players in India. Mobile wallet use has expanded to e-commerce shopping, food delivery, petrol pumps, large retail chains, and pharmacies.
Cartrade– Cartrade Tech Limited also plans to come up with its IPO. The offer would include only an offer for sale as per DRHP. The company is a multi-channel auto platform with coverage and presence across vehicle types and value-added services offering marketing, buying, selling, and financing of new and pre-owned cars, two-wheelers as well as pre-owned commercial vehicles, and farm and construction equipment.
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Disclaimer: The above content is for general info purpose only and does not constitute professional advice. The author/ website will not be liable for any inaccurate / incomplete information and any reliance you place on the content is strictly at your risk.
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