Volatile Street: Startups rein in IPO valuation targets

MUMBAI: Startups are readjusting their IPO valuations amid market volatility. After Amagi Media Labs, the first new-age company to head to Dalal Street this year, Shadowfax has tempered its valuation targets. At the upper end of the price band set at Rs 124 per share, the logistics company is seeking a valuation of Rs 7,169 crore against earlier estimates of over Rs 8,000 crore.

The Flipkart-backed startup has also trimmed the issue size to Rs 1,907 crore from Rs 2,000 crore but it is because existing investors are now selling a lower number of shares than what was planned earlier. CEO and cofounder Abhishek Bansal said that the issue has been repriced to broaden investor participation.

The sensex is down about 2% year to date on the back of a delayed US-India trade deal, broader geopolitical tensions and strong selling by foreign funds due to a weakening rupee. “We wanted to get the right set of investors from a long-term partnership standpoint. We thought this is a great value for investors to come in,” Bansal told TOI in an interview.

A listed company gives confidence to stakeholders about the stability of a business, the CEO said. “It helps us gain long-term contracts with our customers,” Bansal added. The implied valuation of the company is, however, higher than its last official valuation of about Rs 6,000 crore.

There’s a huge difference between private market and public market valuations and secondary markets are correctly pricing their IPOs, said Dharmesh Mehta, MD & CEO at Dam Capital. “In the broader markets, the mid-cap and small-cap index have corrected big time. That will impact IPO valuations and the doability of IPOs to an extent. Unless the geopolitical issues settle, markets will remain volatile,” Mehta said. For new-age companies that can show scale and profitability, IPOs will sail through, and the recent listings have been decent, Mehta said.
Amagi Media Labs reduced its IPO valuation to Rs 7,810 crore, significantly lower than its last valuation of $1.4 billion (over Rs 12,000 crore).