The Big Bang IPO Fear Global stock market meltdowns, geopolitical turmoils, concerns over global financial system, plunging valuations and failure of many Indian startups at IPO have made peers revisit, postpone or withdraw their IPO plans

Weighed down by concerns over market volatility, many tech companies are taking a U-turn or a cautious turn in their initial public offering (IPO) plans. The latest to join the list of companies doing so, according to news reports, are D2C beauty e-commerce unicorn Mamaearth and hospitality major OYO.

While OYO reportedly plans to cut the size of its proposed IPO by around two-thirds, a Reuters report has said that Mamaearth is now in a "wait and watch mode" and has put its IPO plans on hold.

OYO had originally filed to go public in October 2021 but delayed the share sale due to market conditions. It made the company settle for a lower valuation at around $7-8 billion instead of the $11 billion targeted initially.

The company has now said that it is preparing to file a fresh IPO document as soon as this week and the founder and group CEO Ritesh Agarwal was quoted as saying at the company's town hall that with an improvement in cash flow, OYO's reliance on external funds has also gradually decreased over time.

However, volatility in stock markets globally seems to be one of the key reasons behind such decisions of startups. Added to that are the plunging valuations of tech companies. "In preliminary informal checks with investors, there was a difference in the valuation that the company was seeking and what investors were willing to give," said a Reuters report about Mamaearth, quoting sources.

OYO was once valued at around $10 billion and was termed India's Airbnb. However, the firm is still reporting losses and is yet to showcase profitability.

Further, the decline in new-age digital stocks, that is, the stocks of startups such as Nykaa, Zomato, Delhivery, among others reportedly pushed the likes of boAt, Pharmeasy, Droom, Udaan, Mobikwik and a few others to postpone or withdraw IPO plans. According to a Bloomberg report in November 2022, five of the most-hyped technology initial public offerings in India over the past 16 months have floundered since listing, shedding more than $18 billion in value.

"The macro situation has shifted due to rising interest rates and inflation, leading many to seek strong cash-generating companies as opposed to growth companies. The valuation models that extrapolated the valuations of many are sensitive to these rate changes, which has seen many growth stocks globally take a beating in the current market situation," said Siddarth Pai, founding partner, CFO, ESG Officer, 3one4 Capital earlier.

Today, investors and experts have started advising startups that have plans for an IPO to focus on the conservation of cash and strong governance. "A solid IPO team that manages the readiness and execution of the IPO is critical for success backed by a sound board of directors. Keep the communication channels active between the investors, founders and the board to discuss details on your readiness and understanding of your indeX," Amarjeet Singh, partner and national Lead, emerging giants and startups, KPMG India, told us in an earlier interview.

However, experts believe that it is too soon to draw any conclusions. They feel that since we are still in very early days of tech dominance on the public markets, many startups will have a successful stock market run in the next few years, despite today's global fiasco.

Experts watching the markets and global and domestic scenarios closely are positive that the second half of 2023 is when the startups who have postponed IPO plans will take the leap of faith. "Second half of 2023 is when inflation should become manageable and the supply chain shocks that have exacerbated inflation are expected to become manageable, which will be ideal. The bigger issue then would be the US elections in 2024, which does have an effect on how the US will continue to tackle this issue," said Pai.