Several potential Indian technology initial public offerings are in limbo amid economic and political headwinds.
At least eight of the country's tech companies that were expected to file for an IPO have delayed their plans to 2023 or later as tech sector valuations tumble. Given current market conditions, private deals or fundraising is a better bet than a public market listing, technology experts and venture capitalists told S&P Global Market Intelligence.
"Unless we see stability across global markets, the window for tech IPOs in India will not be open as tech valuation expectations have been reset," said Kunal Bajaj, head of capital markets at India-based venture capital firm Blume Ventures.
Some investors are more cautious after seeing last year's tech IPO boom turn into this year's valuation bust. All 10 companies behind the largest tech IPOs in India in 2021 were trading below their IPO listing prices as of the end of November, according to data compiled by Market Intelligence.
For example, shares of digital payments company One97 Communications Ltd., also known as Paytm, were down 69.1% since the company's IPO in November 2021.
Companies that are still indicating plans for an IPO are making slow progress. Hotel aggregator Oyo Hotels and Homes Pvt Ltd. updated its financial disclosures in September, a move seen as a signal that it is looking to revive its IPO plans following reports of a delay in May. Oyo is tentatively planning to launch its market debut in 2023, depending on market conditions, according to a report from local newspaper outlet, The Times of India. The company originally filed for its IPO in October 2021.
Online eyewear shopping portal Lenskart Solutions Pvt. Ltd., which announced its IPO plans in a July 2021 interview with CNBC, intends to move forward with an IPO, but the timing is uncertain. Earlier in 2022, Lenskart's CEO said the IPO will occur within three years, according to Business Today TV.
Representatives for Oyo and Lenskart did not respond to requests for comment on the companies' IPO plans. Neither did representatives for six other tech companies in India that were expected to IPO, including: Walmart Inc.'s Flipkart India Private Ltd.; Byju's K3 Education Private Ltd.; Swiggy; ANI Technologies Private Ltd., also known as Ola; PharmEasy; or InMobi Technology Services Private Ltd.
New regulations in India may also be keeping some startups from pursuing IPOs. This year, the Securities and Exchange Board of India required companies looking to go public to disclose key performance indicators and pricing considerations in their offering documents. Companies also have to pre-file the offering documents for review.
That may make private funding easier than going public, market experts said.
"Private markets will be open as there is enough late-stage capital-raising rounds from venture capitalists and sovereign wealth funds," said Blume Ventures' Bajaj.
In the current environment, some companies may opt for down rounds, when pre-money valuation of a fundraising round is lower than the post-money valuation of its previous fundraising rounds, said Indu Tyagi, vice president at vice president at market analysis company Market Research Future.
An outright sale could also be a good option for some Indian startups, the experts said.
"Acquisitions will be a necessity for those companies which need a bailout to survive and for companies that are planning to beat competition in adjacency markets," said Bajaj.
Likely acquirers will be large corporations with an interest in broadening their business in specific verticals, said Sandeep Murthy, partner at Indian venture capital firm Lightbox.
That may include companies such as Reliance Industries Ltd., Tata Investment Corp. Ltd. or Amazon.com Inc., Murthy said.