ETSA 2021: Too much focus on valuations, Delhivery CEO says in panel discussion on IPOs

But that was before the looming prospect of an interest rate hike in the US and Russia’s invasion of Ukraine played havoc with global markets, depressing the valuations of tech firms worldwide. India was no exception, and the stock prices of the four companies mentioned above have all taken a beating over the past few months, causing other companies with IPO plans to reconsider.

As the exuberance of 2021 wanes, how can startups adapt to the changing realities as they look to transition from private to public markets?

This was among the subjects discussed by a high-powered panel of industry leaders – comprising Nithin Kamath, cofounder & CEO of Zerodha; Lizzie Chapman, cofounder & CEO of Zest Money; Sahil Barua, cofounder & CEO of Delhivery; Urban Company cofounder & CEO Abhiraj Singh Bhal and Shekhar Kiran, partner at venture capital fund Accel – at the Economic Times Startup Awards in Bengaluru on March 12.

“The Indian market is in sync on what’s happening globally. It might be difficult for some startups to list now in the next 3-6 months…LIC IPO may also suck out some liquidity from the Indian markets,” said Kamath.

“Indian startups that are in line for IPOs are certainly ready to go public. Their business models will evolve and people will start trusting them more. People are too focussed on valuations and too little on businesses right now,” said Barua.

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On Delhivery’s delayed IPO, he said, “We were looking at a timeline 18-24 months when we decided to IPO… [but] nobody wants to go public when there are strong headwinds. If the business is good and strong, the most a founder can hope for is a reasonable market. Trying to time the market is something you can’t do. Markets will go up and down. If you let that affect your decision it will be a turbulent journey for you.”

Speaking about the slowdown in IPOs this year, Kiran of Accel India said, “Something has changed in the market now… companies continue to grow… but when the market changes, companies will not go public.”

Lizzie Chapman, CEO of ZestMoney, said she for one welcomed the correction in tech valuations. “We welcome the reality check. The last two years have been difficult for us as a sensible business operating in India because we care about profitability. We had to stop growing at various times during the pandemic,” she said.

Chapman added that there is nothing wrong with companies going public early, assuming they have good fundamentals and a path to profitability.

“We would love to go public, especially in India, because this is one the best markets for lending businesses globally,” she said.

Bhal of Urban Company said while startups will naturally be more cautious about launching IPOs during times of high volatility, there’s no point trying to time the market when looking to go public “if the business is strong”. On Urban Company’s IPO plans, he said: “This year [we’d] rather just focus on business and continue to grow… let the markets come back to neutral and then we’ll reconsider.”