India’s Maturing Internet Firms To Drive Equity Share In Fundraising, Says Jefferies

India’s internet companies are likely to drive the surge in initial public offerings as the nation braces for a record supply of maiden issues worth $30-40 billion in the ongoing fiscal, according to Jefferies.

Equity’s share in total fundraising has been muted in the past decade at around 27%, the research firm said in its note. "India's maturing internet space can change this", pushing that contribution higher to around 40% in 2021-22, it said.

While Zomato Ltd. and CarTrade Tech Ltd. have already filed their prospectus, e-tailer Nykaa E-Retail Pvt.; payments startups Paytm, owned by One97 Communications Ltd., and Mobikwik Systems Pvt.; Walmart-owned Flipkart Internet Pvt.; and Policybazaar Insurance Pvt. are said to be eying a market debut in FY22-23.

Zomato’s proposed IPO is the bigger one among the two companies that have filed the draft red herring prospectus. "Media reports suggests the fintech space (Paytm), pharmatech, edtech and e-commerce could see large IPOs starting this year; and we estimate $5-7 billion of supply in FY22," Jefferies said.

Here’s Jefferies' take on Zomato's Rs 8,250-crore IPO:

• Food delivery is the bedrock with over 80% contribution to revenue.
• A two-player market now, although more competition is possible.
• Covid-19 impacted revenues negatively but helped unit economics; a sustainable level is unclear.
• Clarity is needed on the usage of around 45% proceeds for M&A, nutraceutical foray, etc.
• Technical factors may drive investor interest, which may have boarder implications.