IPO market braces for Omicron, US rate hike fallout

While the Paytm listing debacle dampened sentiment, the IPO market is now turning its worries to the Omicron variant and possible interest rate hikes by the US Federal Reserve.

Sandip Ginodia, CEO, Altius Investech, said there is no deferment of issues till now, except lower listing in few of them.

"Sentiment is slightly subdued but greedy promoters are still making hay while the sun shines", Ginodia said.

Pranav Haldea, Managing Director, Prime Database, said 7-8 IPOs have already been announced for December.

Haldea said while one or two issues including Paytm did not get a good listing, it is also not realistic to expect each IPO to deliver a bumper return.

Haldea said IPOs which have come after Paytm have got good subscriptions and also strong listing.

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According to Haldea, the bigger threat for IPO market is the newly detected Omicron variant and the possibility of the US Federal Reserve hiking interest rate. "These will impact the secondary market which in turn will lead to a slowdown in the primary market as well", he said.

The second half of December is the holiday season. In January, depending on the impact of Omicron, the picture for the quarter will become clear. IPO market always gets affected when the secondary market is volatile, Haldea said.

According to Prime Database, nine issues have announced opening dates in December to raise Rs 7562 crore. These include Tega Industries, Anand Rathi Wealth, Rategain Travel Technologies, Shriram Properties, CE Infosystems, Metro Brands, Medplus Health Services, Data Patterns and HP Adhesives.

In a recent article, Financial Times reported that the Paytm listing debacle has sparked concern from investors and entrepreneurs, fearful that it could derail a string of expected Indian flotations that were supposed to cement the county’s status as a leading destination for tech start-ups after the US and China.

The debacle has put the spotlight on Paytm, its shareholders SoftBank and Alibaba, and bookrunners on the IPO including Goldman Sachs, Morgan Stanley and Citigroup, Financial Times reported.

"The worry for all of us is does this impact the broader India tech sentiment - One bad deal and one instance of bad judgment can upset the apple cart," said the head of equity capital markets for India at one western bank, as per the report.

MobiKwik, an Indian fintech company, has delayed its IPO originally scheduled for November, saying this week that it will "list at the right time", the report said.

Ashneer Grover, the co-founder of fintech BharatPe, said Paytm had "spoiled" the Indian market.

Sandeep Murthy, a partner at investment group Lightbox in Mumbai, said there may be "some period of cooling off" in fintech listings until early next year but argued that it was "natural", Financial Times reported.

Indian tech companies have raised a record $5bn through listings this year, according to Dealogic, about 10 times last year’s total.

In a recent report, Jefferies said mobile wallets saw strong growth over FY16-19, but transaction growth has since slowed, due to a combination of KYC obligations that were imposed in FY20 and Covid-related impact in FY21. The segment was also affected by transactions moving to UPI.

The platform is currently annualising at $29bn worth of transactions, a relatively lower share in the overall retail digital payments segment, the report said.

Indian fintechs have raised $28bn+ in capital since 2014, with a majority being raised by payment startups ($15bn) followed by lending platforms ($6.6bn). Insuretech has seen a pick-up in funding activity lately, while wealthtech segment has lagged in capital raising of late. Neobanks are a more recent phenomenon in India, with cumulative capital raise of $0.5bn. M&A has been higher in the payment gateway segment. A bunch of IPOs and with more in future will expand the Indian financial landscape, Jefferies said.