India convincingly overcomes its IPO demons

Brainbees Solutions

14/08/2024 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Anshuman Daga
       SINGAPORE, Aug 14 (Reuters Breakingviews) - After some
disastrous floats in India, ample caution is paying off. Shares
of e-bike maker Ola Electric Mobility  OLAE.NS  have surged 42%
above their initial public offering price since their debut on
Friday. Baby products e-commerce firm Brainbees Solutions
 BRAE.NS  achieved a gain slightly more than that after a single
day of trading on Tuesday. The deals collectively generated
proceeds of $1.2 billion and cleared the way for larger ones
that can help the country retain Asia's IPO crown.
    The success by two loss-making companies backed by investor
SoftBank  9984.T  banishes some serious capital market demons;
the last wave of high profile unprofitable technology firms to
go public have performed terribly, most notably One97
Communications  PAYT.NS , owner of one-time fintech darling
Paytm: It's trading 76% below its 2021 offer price. 
    Fast forward and companies are becoming less demanding.
While Bhavish Aggarwal's Ola priced at the top of an indicative
range, the $4 billion valuation was a quarter below the figure
set at a previous funding round in September, for example. That
ensured decent demand from both foreign and local investors, and
the usual sovereign backers.
    It adds to a crop of listing that push India to the top of
Asia's league tables as other venues falter: India's $7.3
billion year-to-date total proceeds from IPOs is almost equal to
the entire amount it raised in 2023, Hong Kong is at $2.5
billion and China at $4.9 billion, per Dealogic. India is
besting those once-dominant markets even after factoring in
follow-on issues, secondaries, and convertibles too, with a
total of $34 billion, though that's still barely one-third the
proceeds generated by Hong Kong in 2019 and 2020. India's
famously lumpy market is starting to make consistent
improvements in proceeds raised too. 
    It sets a strong tone for listings to come including the
Indian unit of South Korea's Hyundai Motor  005380.KS , an
expected $3.5 billion deal, and it may encourage loss-making
Prosus-backed  PRX.AS  food delivery firm Swiggy to list sooner.
Tycoon Mukesh Ambani has also promised IPOs for the telecom and
retail units of his $236 billion Reliance Industries  RELI.NS .
Bankers working on this next set of deals will face a different
challenge: To price offers more confidently so they don't leave
so much value on the table.
    Follow @anshumandaga on X     

    CONTEXT NEWS
    Shares in Indian e-commerce company Brainbees Solutions,
which operates online baby products marketplace FirstCry, closed
46% above their IPO price on their debut on Aug. 13, following a
$501 million initial public offering.
    It follows a strong debut from Ola Electric; the scooter
maker's IPO raised $734 million and its shares closed at 108
rupees on Aug. 14, 42% above the offer price after its first
three days of trading.

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Graphic: India's stocks are richly valued    https://reut.rs/4drJiTJ
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 (Editing by Una Galani and Aditya Srivastav)
 ((For previous columns by the author, Reuters customers can
click on  DAGA/ 
anshuman.daga@thomsonreuters.com))