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The week after the festivities of Diwali has been quite eventful in India. Fintech decacorn Paytm opened its mega IPO of almost USD 2.5 billion but saw a lukewarm demand for its shares initially. Although, the issue got fully subscribed by the third and final day of bidding.
Meanwhile, D2C lifestyle company Nykaa made history with its bumper market debut by listing its shares at about 80% premium. For context, high-profile food-delivery giant Zomato, which became the first internet unicorn in the country to go public earlier this July, listed its shares at a premium of around 50%.
The country also got 35th unicorn this year in Good Glamm, a beauty D2C firm, after the six-year-old company raised USD 150 million round from Warburg Pincus and Prosus Ventures. The large funding round was another sign of investors’ increasing affection for local D2C brands.
However, moving beyond the two buzzy themes this week—IPOs and D2C wave—for this week’s big read, we decided to look at a fascinating offbeat space of online liquor delivery, which is often ignored despite being a massive market.
The Big Read
During the pandemic, people in India had a tough time finding alcohol as most of their local bars and liquor shops remained closed. The pent-up demand was increasing, but there weren’t many legitimate players to meet that demand—selling alcohol through e-commerce and home delivery are not allowed in many states in the first place. On the other hand, banning alcohol sales online also weighed on many states’ finances because of the loss of liquor taxes.
Probably that is why in mid-May last year when the country was in its third phase of lockdown, several states one after another decided to sanction the home delivery of alcohol. Maharashtra, India’s second-most populous state is among them. Mumbai-based liquor distributors Living Liquidz became one of several companies to take advantage of this opportunity. With a chain of 50 stores across the capital city of Maharashtra, it provides home delivery of drinks through its mobile app, which it launched last year amid the COVID-19 outbreak.
India’s attitudes towards online alcohol delivery used to be one of the biggest deterrents for potential investors, in spite of its lucrative market size. A few foreign investors were carefully tapping the market, expecting that India will eventually open up to the idea of home deliveries of liquor, a wish only partially granted by state authorities last year as the pandemic hampered their fiscal revenues.
However, as more and more Indians get vaccinated, local lockdowns will be lifted sooner or later. Several states that have approved online sales and home delivery of liquor may revise their policies, meaning that liquor apps that have been growing rapidly since last year might be living on borrowed time.
The Weekly Buzz
1. Zomato announced its Q3 earnings report mixed with widened losses, pulling plugs on non-performing businesses, and investments in Curefit and Shiprocket. The company’s losses in the third quarter rose 90% year-over-year. Company founder and CEO Deepinder Goyal ascribed the losses to its investment in its core food delivery business growth, including costs on marketing and branding.
2. Nykaa’s blockbuster market debut gives birth to India’s richest self-made woman billionaire. The lifestyle omnichannel retail startup saw its market capitalization crossing USD 14 billion as its shares rose more than 95% over the issue price of INR 1,125. This made Nykaa’s founder, Falguni Nayar, who along with her husband and two children owns over 54% stake in the company, India’s richest self-made woman billionaire with a net worth of over USD 7 billion.
3. Paytm’s USD 2.47 billion IPO saw lackluster demand on day one. Ant Financial-backed fintech giant’s IPO was expected to be the largest-ever listing in India’s capital market. However, the initial response from investors was unexpectedly muted. Paytm’s public issue was subscribed mere 18% on day one. By the final day of bidding, the company’s issue was subscribed 1.89 times.
Top Deals This Week
Tune in next week to know how Willam Bao Bean of SOSV sees India’s climate tech startup ecosystem.