For many novice retail investors, deemed the safest route to enter the stock market is through Initial Public Offerings ( IPO). Notably, this IPO world, lately, has undergone a metamorphosis after the post-covid era. Investors, especially retail investors, are cautious of risking their money, as they seemed to learn the lesson from Zomato and Paytm’s diabolical listing downturn.
On the other hand, the instability in the world economic order is pressing companies to be alerted on every cost management decision, whether about hiring, taking debt, or financing through equity offerings.
The looming recession in sight and affected supply chain marred by the Adani-Hindenburg row and the Ukraine-Russia war are stressing companies. Banking criris across Europe and the US has worsened the already sensitive situation. In the latest development in the IPO world, what has been making headlines is the initial share sale of Mamaearth and OYO. Beauty unicorn- Mamaearth has reportedly put its IPO plan on hold while OYO is contemplating trimming its IPO size.
Skincare unicorn Mamaearth has reportedly put its initial public offering (IPO) on hold in light of weak market conditions. It is now in a “wait and watch mode”, people aware of the development told Reuters, as global stock market sentiments are reeling under a volatile environment.
Mamaearth Chief Executive Officer and Co-Founder Varun Alagh, however scrapped media reports saying the beauty startup is no longer moving ahead with its initial public offering (IPO) plan.
“This is to clarify we are still engaging with Sebi on our DRHP (draft red herring prospectus) and awaiting formal approval for the same,” said Alagh. “Post the approval, as is in line with the regulations, we will have 12 months to file RHP and take the company public, which we will do in consultation with our bankers.”
“As discussed during our meeting, neither is our largest investor selling a single share, and also the promoters will continue to own over 97 percent of their ownership in the company after the IPO, hence we have no interest in optimizing for short-term valuations, we are in this for the long term,” said Alagh.
Honasa Consumer, the parent company of Mamaearth, filed its draft papers in December, seeking $200-300 million in funds through a new equity issue and offer for sale (OFS) of a chunk of existing shares.
Some media reports alleged that that personal-care startup is looking at a valuation of up to $3 billion, which the firm later denied. The unicorn posted its first-ever profit in FY22, printing a standalone net profit of INR 19.8 Cr against a net loss of INR 1,332.2 Cr in FY21.
Separately, a Bloomberg report suggests that OYO was looking to file a revised document for its Initial Public Offering (IPO) latest by this week. OYO, however, has trimmed its offer-for-sale of shares amidst bleeding technology stock valuations in the current market. Bloomberg report also said, quoting anonymous sources, the present investors of OYO are not of opinion of selling their shares as part of the IPO.
For the unversed, OYO had filed an offer document with SEBI to raise Rs 8,340 crore ($1.1 billion) in October 2021 at a valuation of $10 billion. The IPO included the issue of fresh equity shares worth Rs 7,000 crore and an offer for sale aggregating to Rs 1,430 crore.
In May 2022, the volatile market conditions prompted the hospitality company to settle for a lower valuation of around $7-8 billion instead of the $11 billion targeted initially. Earlier this year, the market regulator directed the hospitality chain to file revised and updated IPO papers, encompassing information such as updated Risk Factors, KPIs, (Outstanding Litigations, Basis for Valuation), etc.
Fabindia, Joyalukkas, Snapdeal, Droom, and PharmEasy, have shelved their IPO plans or withdrawn their DHRPs, given macroeconomic headwinds and a funding winter.
2023 is turning out to be the most dismal year for IPOs since 2020, with just two mainboard IPOs listing on domestic bourses, data compiled from PRIME Database shows, quoted Business Today. On comparing, six mainboard IPOs launched in the first three months of 2022, and 16 IPOs hit Dalal street between January and March 2021. However, in the Covid year 2020, only one IPO was listed on bourses till March.