FirstCry, Ola Electric and Unicommerce are all set to hit the primary market this month. While they come from different sectors, there's a common thread tying their D-street debuts, all three start-ups are backed by Masayoshi Son-owned Softbank.
SoftBank is expected to realize gains of approximately $1.5 billion from these IPOs, significantly boosting its financial profile in India, said Somdutta Singh, Founder and CEO Assiduus and Angel Investor.
Softbank holds around a quarter (in some cases more than 25 per cent) of the stakes in each of these companies. It holds a stake of around 25.55 per cent in FirstCry, 21.98 per cent in Ola Electric and nearly 30 per cent in the SaaS-based e-commerce management firm Unicommerce.
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Not only does it seem like Softbank could witness a big return bag, but it might also boost the momentum for other new-age IPOs entering the market.
A Mixed Flashback?
When Nykaa, Paytm and PB Fintech (Policybazaar) initally got listed on the bourses, they witnessed a sharp decline in investor confidence, eventually dragging down the share prices in the red territory. This downturn was largely owing to the broader funding winter that had gripped the market and a standard realisation hitting investors, that financials were not as good as they expected.
However, as concerns around this funding freeze began to dissipate and funding conditions improved, a renewed sense of optimism emerged. New-age companies such as Zomato and Delhivery started reporting profitable figures, signaling a turnaround in the market.
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This shift in sentiment helped new-age companies, waiting to enter the primary market, have confidence in an improving environment.
For instance, Honasa's mamaearth, which launched its IPO just last year, witnessed a robust response from investors. The company was oversubscribed by nearly 12 per cent on its first day of listing.
"The Indian IPO market is indeed showing signs of revival. The initial euphoria of 2021, marked by high-profile listings of companies like Paytm, Zomato, and Nykaa, has somewhat cooled down. After a relatively subdued period, we're witnessing a surge in new-age tech companies lining up for their market debut," said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.
Goel highlighted multiple factors including improved investor sentiment, relaxations in regulatory norms and a strong startup ecosystem, fueling this renewed interest.
What's in for Softbank?
As Firstcry, Ola Electric and Unicommerce prepare to hit the primary market, venture capitalists and the startup community are already speculating about gains the investment firm might see from these IPOs.
However, it also indicates a shift in SoftBank’s investment strategy.
Instead of diving into new investments, the focus seems to be on capitalising on existing ones and reaping the rewards from its current portfolio.
"SoftBank's current strategy seems focused on consolidating existing investments rather than aggressively pursuing new ones. Investor sentiment suggests that if the IPOs perform well, it could pave the way for SoftBank to re-enter the market with renewed vigor, particularly in sectors showing robust growth potential," said Singh.
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While the entry of new-age companies in the primary market might reflect confidence and broader markets' momentum, investors must not turn a blind eye towards due diligence while making investments.
"It’s crucial to carefully evaluate the promoters’ track records, the companies’ financial health, market positioning, and growth prospects before making investment decisions. These IPOs might present exciting possibilities, a prudent approach is essential to ensure informed and wise investment choices," said Narinder Wadhwa, Managing Director & CEO of SKI Capital.
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