When the history of Indian fintechs is written, 2021 will be highlighted as the golden year for the sector. Many important milestones were reached during the year.
While global fintech companies also performed very well in the year, 2021 was a significant year for their Indian counterparts as they matured over the course of the year.
Overall, the financial environment has been good for the financial sector, with liquidity and mobility constraints driving users to use fintechs for various transactions. From day-to-day banking to financial transactions, asset purchases and stock exchange transactions are now all handled by fintechs using only your mobile. No surprises then fintech has been in the news and has attracted the money.
In private equity, 2021 was the best year yet for fintechs. A record amount was raised by Indian fintech, demonstrating their capabilities. A record $4.6 billion was raised in the first three quarters of 2021, compared to $1.6 billion in 2020. Investments worth $2.4 billion were raised from 53 deals closed in the third quarter.
While the influx of investment into the fintech sectors is encouraging news, the main highlight of the year was the exit of private equity and strategic investors from companies in which they have invested. In a move that, given the start-up space in general, and Fintech in particular, is a booming primary market has led to the industry’s first new age company to be listed on the Indian stock exchanges.
The most important event was undoubtedly the listing of Zomato. Before that, Indian markets were not considered mature enough to see loss-making start-ups raising money. But Zomato’s strong listing and post-listing performance have allayed that skepticism.
Zomato, which came out with its release in mid-July, had priced its IPO in a range of Rs 72-76. A high oversubscription of 38.25 times helped open the issue with a bang and it is currently trading at nearly twice the bid price.
A strong secondary market also helped build investor sentiment when the issue launched. Since the beginning of 2021, the benchmark indices have shown a return of 17 percent and since mid-July a return of 7.25%. Zomato has made a return of 14 percent on the quoted price and nearly 80 percent on the bid price.
Zomato’s strong response and performance in the market helped other fintechs muster the courage to approach the market. While many companies have applied to the market regulator, the Securities and Exchange Board of India (SEBI), a few have already listed themselves.
Policybazaar and Paytm are the other two fintechs that quickly became listed in the Indian markets. Policybazaar came out with its IPO in the first week of November at a price range of Rs 940-980 and is currently trading at Rs 1083.75 after hitting a high of Rs 1,470 within days of listing.
Paytm was the other high profile stock to hit the market in the second week of November at a price range of Rs 2080-2150. The company managed to register its IPO, but since the time of listing, it has failed to hit the bid price. The stock is currently trading at Rs 1,321 and is approaching its all-time low.
While the performance of the three fintech IPOs has different stories to tell, a key benefit is Indian markets’ willingness to fund fintechs.
Profit may be an important parameter for many traditional investors, but the new generation of fund managers and investors is willing to bet on start-ups and fintechs that can quickly capture market share, disrupt conventional business practices and have the ability to grow rapidly. Profits, they believe, will follow as costs fall and economies of scale are achieved.
(Vikas Singhania is the director of TradeSmart, a stock brokerage platform)
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