Article

Capital, Brands and IPOs

Capital, Brands and IPOs

Successful brands have often been measured by how well defined their target audience is, how good their reputation is, and how widely they are known to their target audience. A recent addition to this definition of success, especially for Venture Capital backed startups, has been their ability to pull off a successful IPO. Before 2021, no Indian startup had dared to think of or attempt to go public. Multiple startups have spoken about going public at some point in the future, but without any clarity or confidence in being able to pull it off (It requires even small retail investors to show trust and belief in a business for a successful IPO). This lack of confidence can mostly be attributed to one unknown – The Strength of their Brand.

Venture Capital and Private Equity backed startups give a lot of importance to brand building. A business that performs strongly was likely to get acquired by a larger company, thereby giving their investors an exit. Moreover, brand building goals were often linked to business performance. For most funded startups in India till 2021, the most likely exit route was through an acquisition. Preparing for an IPO was a completely different ball game and very few even thought about it.

However, with a few game changing IPOs in the US and China, like that of Facebook, Uber and Alibaba, the Indian VC/PE Industry started viewing IPOs as a very achievable exit for their investments. Below is a snapshot of the few big startups that have given their early backers, exits through IPOs.

  1. Nazara Technologies: IPO was an offer for sale of 5.29 million shares—equivalent to 16.7% stake—in a price band of Rs 1,100-1,101 apiece.
  2. Zomato: Zomato IPO received bids for almost 28 billion shares against an issue size of approximately 720 million shares. The issue comprised fresh stock worth Rs 9,000 crore and an offer for sale of up to Rs 375 crore by Info Edge (India).
  3. CarTrade: CarTrade’s IPO received bids for 263 million shares as against the issue size of 13 million shares. 
  4. Freshworks: Freshworks Inc, the first Indian software maker to list on the Nasdaq, raised over $1.03 billion in its initial public offering, recording a market capitalization of $10.13 billion.
  5. Nykaa (FSN E-Commerce Ventures): The price band for the Nykaa IPO was set at Rs 1,085-1,125 per share, at the upper end of which the company was valued at Rs 53,204 crore, or about $7.1 billion.
  6. Policybazaar (PB Fintech Ltd): Policybazaar IPO received bids for 572 million equity shares against an offer size of 34.5 million shares. The issue comprised fresh stock worth Rs 3,750 crore and an offer for sale of up to Rs 1,960 crore.
  7. Paytm (One 97 Communications Ltd): Paytm IPO received bids for 91 million equity shares against the total issue size of 48 million shares. The issue comprised fresh stock worth Rs 8,300 crore and an offer for sale worth Rs 10,000 crore at a price band of Rs 2,080-2,150 apiece, at the upper end of which the company was value at Rs 1.50 lakh crore.
  8. MapmyIndia (CE Infosystems Ltd): MapmyIndia IPO received bids for 1 billion shares as against the issue size of 7 million shares.

Apart from the above listed ones, companies like Cred, CureFit, Meesho, Oyo, PharmEasy, Groww, Urban Company, Upgrad and a few more are currently planning to go public in the coming months.

The last decade has seen extra-ordinarily large sums of money being invested into Indian startups, with several of them having raised over a Billion dollars in a single calendar year. A lot of this VC/PE money has found its way into main stream advertising as well. Almost all major sports events in India are sponsored by VC funded startups, wanting eyeballs from the common man. The route is clear. Get as much visibility as possible before announcing a Public Offering. The communication from these IPO bound startups is bold, attracts all ages, and brings forth a feeling of Indian-ness. This time the branding efforts have a clear goal – Attract all retail investors.

With the quantum of Capital being pumped into Indian startups increasing exponentially, brand journeys have had to undergo radical transformations. Getting the common man to part with his hard-earned money by subscribing to an Initial Public Offering, is one of the top priorities of branding teams within the well-funded startups. It is safe to say that as more capital finds its way into Indian start-ups, we can expect to see more brands becoming household names, irrespective of whether the common man is a consumer of their products.

About the Author

Akshay Sasikumar is the Managing Partner at www.82advisory.com, a firm that specializes in Capital Strategy and investment banking services for technology companies.