MUMBAI : Indian fintech’s sector may be over the hump having learnt to navigate regulatory and market uncertainties and training its focus on profitability, allowing for companies in the space to consider listing on stock exchanges, said panelists at the Mint Annual BFSI Summit.
“Although the movement has been slow in the fintech IPO area, it is likely to pick up pace as now the market is prepared having learnt from Paytm IPO, which was the first fintech IPO so to say,” said Richa Choudhary, partner-capital markets, Trilegal, in a discussion on the topic ‘Fintech’s Path to the IPO: Distant or Realistic?’.
Paytm, which like several other companies that went public in 2021, had a rough run owing to weakness in the broader equity markets, lesser-than-expected subscription, and heightened competition, among other reasons. Over the past year, though, its shares have gained about 18%.
Broadly, the fintech sector witnessed a downturn as the volatile nature of the market and high interest rates dampened investor sentiment and made them cautious about conducting due diligence in every aspect of a business.
“Anyone who was predicating their business models around regulatory arbitrage had to go back to the drawing board to realign the business,” said Kunal Varma, chief executive of digital banking platform Freo.
Industry experts are more optimistic now about the fintech sector and believe that companies are better equipped to go public.
Fintech companies are now more ready to list on bourses, said Nirav Shah, managing director, Equirus Capital.
“(Venture capital) investors are likely to pay a 15-year forward valuation but have a 4-5 year investment horizon, whereas a public market investor might pay only a one-year forward valuation but is likely to stay with you longer,” he said.
Fintech companies “have realised that the business has to be not just high growth but sustainable and profitable before tapping the IPO market,” Shah added. “Companies should work with the regulator to build trust and have transparency that needs to be maintained if they have IPO ambitions.”
Tracxn in a recent report said the fintech sector is expected to see long-term significant growth aided by a larger customer base and government-driven initiatives. It added that sub-sectors such as alternative lending, payments, and banking tech were the top-performers, with BNPL (buy now, pay later) seeing significant growth due to increase in digitisation and rampant adoption in the country.
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Published: 11 Jan 2024, 03:23 PM IST