Two years of internet IPOs: rush, retreat, regroup

livemint.com:

₹1 trillion, some heralded a new phase for Indian internet businesses. Five more internet businesses—typically, visible and fast-growing, but bleeding—followed Zomato to sell shares to the public at rich valuations, in the process offering exits to institutional investors who had shepherded them till then. Two years on, public investors stand singed, private capital faces animosity, and companies are under scrutiny.

The silver lining of that episode of excesses is that these listed businesses, chastened by that experience, are shaping stronger business fundamentals—the time-tested way to draw investors. Public investors will take some winning over. In their spreadsheets, the returns column at three measuring points for these six internet businesses is awash with red.

Only Zomato is above issue price. Current losses over listing-day closing range from 25% to 66%. Meanwhile, the benchmark BSE Sensex has been mostly steady, and is up 25% over July 2021 levels.

Lately, some of these internet stocks have clawed back. In the past six months, for example, Zomato is up 74% and fintech company Paytm 43%. This rise comes in the backdrop of companies focusing on growth that is robust, sustainable and, increasingly, self-sustaining.

One measure of this is the net cash flow from operations—actual cash a business generates (positive value) or needs infusion of (negative value) to keep going. And there has been much improvement on this count. Paytm’s operations, for example, have gone from needing a cash infusion of ₹1,236 crore in 2021-22 to generating ₹415 crore of surplus cash.