When the history of Indian fintechs will be written, 2021 will be featured as the golden year for the sector. Many important milestones were crossed during the year.
While global fintech companies also performed very well during the year, 2021 was an important year for their Indian counterparts since they came of age during the year.
Overall, the financial environment has been good for the finance sector with liquidity and mobility restrictions nudging users to use fintech’s for several transactions. From day-to-day banking to financial transactions, asset purchases and the stock market operations all are now provided by fintechs using just your mobile. No surprises then fintech has been in the news and has attracted money.
On the private equity front, 2021 was the best year to date for fintechs. A record amount of money was raised by Indian fintech, demonstrating their capability. In the first three quarters of 2021, a record $4.6 billion was raised as compared to $1.6 billion in 2020. Investments worth $2.4 billion were raised from 53 closed deals in the third quarter.
While investment inflows in the fintech sectors are heartening news, exits of private equity and strategic investors from companies they have invested in have been the major highlight of the year. In a move that has, in general, given the start-up space reasons to cheer and Fintech in particular, a buoyant primary market has resulted in the first new age company getting listed on the Indian bourses.
Undoubtedly, the most important event has been the listing of Zomato. Prior to that, Indian markets were not considered being mature enough to see loss-making start-ups companies raise money from. But Zomato’s strong listing and post-listing performance have laid that skepticism to rest.
Coming out with its issue in mid-July, Zomato had priced its IPO in a range of Rs 72-76. A high over-subscription of 38.25 times helped the issue open with a bang and is presently trading at nearly twice the offer price.
A strong secondary market also helped build up investor sentiment when the issue was launched. Since the start of 2021, the benchmark indices have given a return of 17 percent and since mid-July, it has given a return of 7.25 percent. Zomato has delivered a 14 percent return from its listed price and nearly 80 percent from the offer price.
The powerful response and performance of Zomato in the market helped other fintech’s muster enough courage to approach the market. While many companies have filed with the market regulator the Securities and Exchange Board of India (SEBI), a few have already got themselves listed.
Policybazaar and Paytm are the other two fintech’s that are were listed in quick successions in the Indian markets. Policybazaar came out with its IPO in the first week of November at a price band of Rs 940-980 and presently trades at Rs 1083.75 after touching a high of Rs 1,470 within days of getting listed.
Paytm was the other high-profile stock that tapped the market in the second week of November at a price band of Rs 2080-2150. The company managed to get its IPO subscribed, but since the time of listing, it has not managed to touch the offer price. The stock presently trades at Rs 1,321 and is close to touching its all-time low level.
While the performance of the three fintech IPOs have different stories to tell, an important take away from it is that Indian markets are willing to finance fintechs.
Profit may be an important parameter for many traditional investors, but the new breed of fund managers and investors are willing to bet on start-ups and fintechs that have the ability to garner market share quickly, disrupting the conventional way of doing business and are able to grow fast. Profits, they feel will follow as the costs come down and economy of scales are achieved.
(Vikas Singhania is the Director at TradeSmart, a stock brokerage platform)
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