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Breakout moment

12 July 2021 By Una Galani, Sharon Lam

Success begets success. Bukalapak’s and Zomato’s respective initial public offerings underway in Indonesia and India will help other startups decide whether to list at home or to venture to New York where investors are comfortable backing loss-making companies. It’s reminiscent of a test Hong Kong passed a few years ago.

The 2018 flotation of Chinese food delivery giant Meituan was a turning point for the Asian hub. At the time, the local bourse changed its rules to allow dual class shares and unprofitable businesses, helping the city to become a magnet for technology companies. Meituan shares have more than quadrupled.

Indonesia’s sleepy capital market of mostly traditional industries may struggle to match that success. Even though officials are rejigging rules to make it easier for startups to go public, e-commerce minnow Bukalapak’s up to $1.1 billion share sale will exceed the total IPO proceeds in the full year prior to the pandemic, per Dealogic. Even if it is well received, larger peers like super-app GoTo – targeting a mooted valuation of some $40 billion – will need a foot overseas to tap deeper pools of liquidity.

India is better positioned. There’s strong demand for food delivery outfit Zomato’s $1 billion-plus offering. At the top end of price range, the loss-making group will be valued at $8.6 billion, or 23 times year-to-March 2020 sales. That’s a hefty premium to Meituan. But at just one-third of total pre-pandemic year IPO proceeds, the deal size-wise is manageable for the country’s $3 trillion equity market. What’s more, Indians are starting to save via formal financial channels and invest in stocks. Shares of companies that listed in India in 2020 are trading some 110% above their offer price, compared to the 89% global average performance, Dealogic data shows.

Ritesh Agarwal, founder of SoftBank-banked Oyo Hotels & Homes, is watching to see how Zomato performs as he ponders where his own company might list, he revealed at a Reuters Next event hosted by Breakingviews last week. Other entrepreneurs will be keeping an eye out as well. India’s market is closer to a Hong Kong-style success than others.


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