Nykaa, Paytm and Policybazaar will set the tone for Digital story

Biggest since Zomato

The last big IPO success in the digital space was Zomato. One can argue that CarTrade was also a digital IPO but that issue just about pushed through and the stock is still quoting at a discount. It is in this context that the IPOs of Nykaa, Policybazaar and Paytm assume a lot more importance. They will be deciding whether the initial euphoria created by Zomato will sustain or whether the aura of digital IPOs will gradually peter out. Here is what is currently in the works.

Nyka, Policybazaar and Paytm

These three IPOs are material because, between them, they will collect close to Rs.30,000 crore as IPO money. That is a lot of money at stake considering that Policybazaar and Paytm are still making losses and Nykaa has just turned into profitability in FY21. The initial response to the anchor placement and the initial road shows has been quite impressive. The Nykaa IPO is already subscribed 4.82 times by the end of the second day and is likely to see a more robust show by the end of Day-3. That will set the tone for the demand patterns for Paytm and Policybazaar too. But there is also the bigger valuation story hidden here.

Valuations are formidable

While the largest Indian IPO of Paytm will peg the valuations of One97 Comm at $18.6 billion, Nykaa and Policybazaar are being valued in the range of $6 to $7 billion. Either ways, they are likely to add close to $32 billion of market cap on listing, at the very basic level. These are expensively valued but loss-making companies so the overall market P/E may go for a toss but that is the way it is going to be. It remains to be seen if the follow up buying in the secondary markets is strong enough to keep the prices of these digital players buoyant. In their success, will rely the strategy of the other digital plays on the anvil.

Big digital names in the queue

These 3 stocks will only mark the start of the digital IPO trend. Hence they hold the key to the spate of future IPOs. There are big names in the queue. MobiKwik will be coming to the IPO market soon enough but there are much more valuable names like Swiggy, Ola, Oyo Rooms and even Flipkart and Byju’s waiting in the sidelines to enter the IPO market. These five companies are worth more than $60 billion in terms of last indicative valuations so there is a lot of digital hunger in the market for Indian funds. If the IPOs of Nykaa, PB Fintech and Paytm get a solid response from QIBs, retail and NIIs, we could see the next few months of the IPO story being dominated by a digital IPO boom!