The recent wave of tech startups filing for Initial Public Offerings (IPOs) has garnered strong interest from both institutional and retail investors, indicating a growing appetite for companies with solid fundamentals.
Following the successful market debuts of firms like Nykaa, Zomato, Mamaearth, Ixigo, and TBO Tek, the importance of profitability and sound financials in the public market has become increasingly evident.
Ola Electric and Unicommerce, both of which opened for public subscription earlier this month, exemplify contrasting outcomes in the IPO market. Ola Electric, an electric mobility company backed by SoftBank, launched its IPO with an issue size of Rs 6,145 crore on August 2. Meanwhile, SaaS firm Unicommerce, based in Delhi, opened its IPO on August 6 with a much smaller issue size of Rs 276 crore.
Despite the difference in size, Unicommerce’s IPO was oversubscribed by a staggering 168 times, signaling significant investor confidence and suggesting a potential strong listing performance. In contrast, Ola Electric’s IPO was oversubscribed by only 3.86 times, highlighting a more cautious investor sentiment.
The total bids for Unicommerce reached over Rs 25,600 crore, surpassing Ola Electric’s Rs 15,000 crore, despite Unicommerce’s IPO being less than 4.5% of Ola Electric’s issue size. Unicommerce reported a revenue of Rs 104 crore for the fiscal year ending March 2024, with a profit of Rs 13 crore. In comparison, Ola Electric generated Rs 5,010 crore in revenue but incurred a loss of Rs 1,584 crore during the same period.
The contrasting IPO performances of these two companies may influence future investor preferences, with a potential tilt toward startups that demonstrate profitability and consistent year-on-year growth. If Unicommerce’s stock performs well post-listing, it could reinforce the attractiveness of smaller, profitable firms in the public market, whereas a weaker performance by Ola Electric may deter investors from loss-making companies.
Startups like Unicommerce, Ixigo, and TBO Tek are showing that achieving Unicorn status is not the only path to success. These companies illustrate that even with a modest scale, a strong financial foundation or a viable business model can lead to a successful public offering.
The trend suggests that smaller firms, once they prove their potential or establish strong credentials, are being valued at a premium due to their perceived long-term growth opportunities. Conversely, for larger companies, particularly those with significant secondary offerings, IPOs may be viewed more as exit opportunities for early investors rather than attractive entry points for retail investors.
