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(Bloomberg) -- Sahil Barua, chief executive officer of logistics startup Delhivery Ltd., minces no words about the process of going public in what’s shaping up to be an historic meltdown in the technology industry.
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“It was nerve-wracking,” said the 37-year-old, who is also a co-founder.
The IPO last week came only after months of discussions with potential investors and investment bankers, Barua said in a video chat this week. Executives paid multiple visits to would-be backers to explain the business models and numbers at the company, which is based in Gurgaon in the suburbs of New Delhi.
Barua and his team slashed the size of the offering by about 30% at the beginning of May and then decided to price shares conservatively, essentially sacrificing some cash in the short-term to try to avoid a tumble for investors. Shares are now up 10% from Delhivery’s debut, which he thinks signals solid appetite for risk in India’s public markets despite a drop in financing from venture capital firms.
“Technology stocks had corrected more than 20% in the period between filing our initial draft documents to our IPO so we modified our pricing,” Barua said. “We decided we’d rather have modestly-priced shares which rise rather than tumble on listing.”
Shares, which debuted at 487 rupees each, closed Wednesday at 536 rupees.
That the founders weren’t selling any shares in the company sent the right signal to the market, he said. Although retail investors bid for only about half the shares that were on sale, institutional investors flocked to the stock, resulting in an oversubscription.
“Retail investors have a hard time understanding why new-age technology companies make losses,” he said.
A rout in technology stocks is resetting expectations for the venture capital ecosystem, which has grown dependent on a flood of cash from privately held funds to finance money-losing operations. Delhivery -- which provides last-mile delivery, warehousing and cross-border logistics support to a variety of companies -- has been grabbing market share by spending its cash on buying smaller rivals. It’ll continue to chase acquisitions with the proceeds of the IPO, Barua said.
Delhivery’s decision to stick to its IPO plans despite the market turmoil may stem in part from the need to replenish its reserves. Its cash hoard had shrunk to just over 3.6 billion rupees ($46 million) at the end of 2021 from more than 16 billion rupees at end-March 2019, while total expenses almost doubled in the nine months to December 2021 from a year earlier. Losses almost tripled over the same period.