Snapdeal, the Indian e-commerce company founded in 2010, had plans to go public in 2021, but the IPO was delayed due to market conditions. Business Today had the opportunity to interview Snapdeal founder Kunal Bahl to gain more insight into the company’s decision.
Bahl, who also invests in seed-stage startups through his VC firm Titan Capitals, explained that the capital constraint is “not just because private equity players are getting narrow-minded, it’s because of how much money Companies were able to raise capital from the stock market.” He pointed out that the postponement of Snapdeal’s IPO was due to market conditions, meaning the company was unable to access as much capital as it had hoped.
Additionally, Bahl noted that despite the fanfare several new-age digital companies received upon their listing on Indian equity markets, investors are now focused on profitability and cash flows.
“And I think that was a valuable learning for the entire ecosystem. And so it’s not surprising that companies across our ecosystem are optimizing for profitability across the board, because everyone recognizes that eventually there will be some M&A in the private markets,” said the founder of the e-commerce company.
He added that unless enough companies in the technology sector that are now private are listed on the public markets in India and have a successful listing, there would be a cap on their own valuation growth and their attractiveness to growth investors.
“Look, eventually there will be a certain amount of mergers and acquisitions in the private markets. But unless enough companies in the technology sector that are now private are listed on the public markets in India and have a very successful listing and build consistently and consistently on publicly traded companies that generate cash flows, enhance their valuations and reward shareholders, if that doesn’t happen, there will be almost something of a ceiling that private companies will hit in terms of their own valuation growth,” Bahl said.
Bahl stressed that the answer lies not in when markets will open up and create suitable conditions for new-age companies to list, but when companies in the sector will be ready to generate enough cash flows and profits for public markets to open up considered them more durable and valuable.
He concluded by saying, “To sum up, I think the answer isn’t whether the markets will open. The answer is when the companies in our sector will be ready to generate enough cash flows and profits that the public markets find them more durable and valuable.”
Snapdeal isn’t the only one delaying its IPO due to market conditions. Many other Indian companies, such as content-to-commerce platform Good Glamm Group, hotel aggregator OYO, jewelry chain Joyallukas, wearables brand boAt and many others have done the same.
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