Zerodha’s Nikhil Kamath wonders about retail investors’ appetite for the “next round of startups going public”; here’s why

Nikhil Kamath, co-founder of Zerodha, who is a regular on Twitter providing insights into stock investing and wealth management, tweeted recently wondering if retail investors would choose to invest in the next round of startups that go public. He noted that retail investors have largely underperformed in the last few rounds of startups going public.

In his post on Twitter, Nikhil asked netizens what individual investors would buy from new-age tech companies in the next round of IPOs. He noted that Zomato currently has the highest amount of private money, and he wondered if retail investors are buying what they know.

“Retail investors in startups have largely underperformed; how big do you think the appetite will be for the next round of startups going public? Let’s buy what we know, Zomato has the highest amount of retail money and we order groceries more often than insurance/cars/cosmetics…” he tweeted Dec. 9.

In his tweet, Kamath shared a pie chart curated by InvestyWise that showed data on major startups that have gone public and their share of retail investors.

Retail investors in startups have largely underperformed; How big do you think the appetite will be for the next round of startups going public?
Let’s buy what we know, zomato has the highest amount of retail money, and we order groceries more often than insurance/autos/cosmetics…pic.twitter.com/fTGETVrklA

— Nikhil Kamath (@nikhilkamathcio) December 9, 2022

According to the pie chart data, Zomato had the highest amount of private money and retail investors. As of September 30, 2022, the company counted 17,99,257 retail investors holding 6.12 percent of the company. Their holdings stood at Rs 3,389.9 crore as of December 6th.

Homegrown payments app Paytm, parent company One 97 Communications, ranked second on the list with 4/11/571 retail investors on board who owned approximately 6.37 percent of shares in the company as of September 30, 2022.

Paytm’s parent company recently said it could seek a share buyback at a December 13 board meeting. The company came under pressure a few weeks ago when its investor Softbank launched a block deal to sell around $200 million worth of shares after the lock-in period for pre-IPO investors ended. SoftBank owns 12.9 percent of Paytm and plans to sell 29 million shares, or 4.5 percent, of the fintech company.

One97 Communications’ journey in the stock market has been a choppy one. The stock is down 65 per cent since its IPO in a price range of Rs 2,080 to Rs 2,150 per share. Paytm debuted on the exchanges on November 15, 2021 after raising a whopping amount of Rs 18,300 crore. It is currently trading at Rs 544.75 on BSE.

Earlier this week, Kamath shared an infographic claiming that retail investors have far less influence over the Indian stock market in the country. Kamath said the impact of retail investors is less than most think. Citing a BQ Community research note, which highlighted that companies listed in India are mostly owned by private promoters and foreign investors, he said ownership by retail investors is also lower than that of mutual funds but higher than that of governments and insurers.

The pie chart showed that private promoters in India owned around 45.13 percent of companies listed in India, followed by foreign institutional investors (FIIs) who own around 20.15 percent of the shares, making them the largest non-promoter shareholders in the Indian market.

The data showed that mutual funds owned around 7.75 percent, while retail investors held only 7.42 percent of the domestic market. The government had around 5.48 percent, insurers around 4.99 percent, LIC 3.83 percent, others 3.16 percent. The wealthy investors held 2.09 percent of the Indian market.