Over the past few months, investors in companies like HDB Financial, Ather Energy, and NSDL have scaled back their stake sales, opting to wait for better post-listing exits through block deals and secondary sales. The latest to join the trend are Bluestone, Smartworks and Indiqube.
Stake sales in upcoming IPOs by SK Finance and LG may also be trimmed, according to people familiar with the matter who did not wish to be identified. Queries sent to both companies did not elicit a response at the time of publishing.
Further, given the steep corrections most 2021-vintage IPOs faced after listing at inflated valuations, bankers are now urging companies to adopt more rational pricing and leave enough on the table for incoming investors.
In Bluestone’s case, for instance, private equity investors Accel and Kalaari have pared their OFS component, while IvyCap Ventures has withdrawn from the sale entirely.
“High-growth companies, especially those growing 40-50% year-on-year, deserve a premium, but the market right now isn’t always giving them a fair comparison or valuation,” Vikram Gupta, founder and managing partner at IvyCap Ventures toldMint.
He added that once the lock-in period ends after Bluestone’s listing, investors will re-evaluate based on where the market is. “Post-listing, if the gap in perceived value still exists, we might continue to hold,” Gupta said.
Viren Jairath, a banker on the Bluestone IPO, said the pricing has been decided based on road shows and feedback from institutional investors.
“It also factors in the business of the company and the market environment,” said Jairath, who is managing director – equity capital markets and syndicate at Kotak Mahindra Capital Co., the investment banking arm of Kotak Mahindra Group. “Few of the current shareholders have decided to reduce the quantum of their OFS in the IPO and plan their exits at a subsequent time.”
According to a source, Bluestone was earlier expected to command a valuation of over ₹10,000 crore, but it is now down to lower than ₹8,000 crore.
Prakash Bulusu, joint CEO at IIFL Capital, said investors and selling shareholders have realised they can make higher blended returns even after listing, and IPOs will continue to be right-sized on feedback from investors during road shows.
“Since large block deals are now possible to sell due to high domestic demand, investors are not in a hurry to cash out during the IPO and can play the waiting game,” said Bulusu.
NSDL’s IPO launched last month, which was OFS only, saw the offer being trimmed from 57.26 million shares to 50.15 million. Similarly, HDB Financial Services reduced its OFS as against the earlier planned ₹10,000 crore. Smartworks reduced the size of OFS component to 3.38 million shares from the initially planned 6.76 million shares. Indiqube, too, reduced its OFS size by half from ₹100 crore to ₹50 crore.
Better later than now
The current valuation mismatch is prompting many investors to defer exits until after listing, with more secondary transactions and block deals expected to pick up going forward, both of which have gained momentum since the first quarter of this fiscal.
Mint reported earlier that investors executed 12 block deals worth ₹3,541.97 crore in the first 15 days of May, compared to five deals worth ₹506.37 crore in April, according to data from Prime Database.
The abundance of IPOs in the pipeline, which is diluting investor appetite, is also driving the dip in IPO valuations. “With anchor investors having multiple options to choose from with a strong pipeline of over 70 companies for IPO, the available capital is being spread thin. That’s why not every IPO is getting the valuation it hoped for,” Gupta said.
As per data from Primedatabase, India has seen ₹54,392 crore being raised via 32 IPOs in the current calendar year. In 2024, there were 90 IPOs that helped companies mop up ₹1.59 trillion as against ₹49,758.4 crore raised in calendar 2023 through 59 public offers.
