Two major Indian startups, Ola Electric and FirstCry, are gearing up for their public listings this month, testing investor interest. However, both companies have had to adjust their share prices below their previous valuations to align with the current market conditions.
Ola Electric, the largest electric two-wheeler manufacturer in India, plans to raise over $730 million by selling shares at ₹72 to ₹76 each. This pricing values the company at around $4 billion, a 26% decrease from its previous $5.4 billion valuation in October 2023. Similarly, FirstCry, the leading e-commerce platform for mother and baby products in the country, aims to raise up to $501 million at a valuation of $2.9 billion, reflecting a more conservative approach compared to previous valuation targets.
The more cautious approach by these companies aligns with the trend where startups are adjusting their valuations to meet the standards of public market scrutiny. This strategy aims to attract long-term investors and improve the performance of the stocks post-listing, ultimately benefiting the company in the long run.
Despite their upcoming IPOs, both Ola Electric and FirstCry have yet to turn profitable. Ola Electric reported a loss of $189.2 million in the last financial year, while FirstCry saw a loss of $38.3 million, showcasing the challenging path to profitability for these startups.
While the lower valuations may impact returns for some investors, there is potential for gains post-listing. SoftBank, a major investor in both companies, stands to make profits from the IPOs, indicating a positive outlook for these startups in the public markets.
These IPOs come at a time when Indian startups are preparing for a surge in public listings over the next couple of years. The tech sector in India has seen mixed results since 2021, with significant growth in the benchmark Sensex index.
According to industry experts, IPOs in India are viewed as the beginning of a new phase in a company’s journey rather than an exit strategy. Public market investors scrutinize growth and profitability closely, emphasizing the need for founders to showcase a compelling vision for sustained growth.
