Mumbai's startup scene is witnessing a significant shift as companies heading for initial public offerings (IPOs) are readjusting their valuation targets. Market volatility is forcing these new-age firms to temper their expectations, with logistics startup Shadowfax and media tech company Amagi Media Labs leading this trend.
Shadowfax Trims Valuation and Issue Size
Shadowfax, backed by Flipkart, has decided to lower its valuation target for its upcoming IPO. The company now seeks a valuation of approximately Rs 7,169 crore at the upper end of its price band of Rs 124 per share. This figure marks a notable reduction from earlier estimates that exceeded Rs 8,000 crore.
Alongside the valuation cut, Shadowfax has also trimmed its issue size to Rs 1,907 crore from the initially planned Rs 2,000 crore. This adjustment comes because existing investors are selling fewer shares than originally intended.
CEO Explains Repricing Strategy
Abhishek Bansal, CEO and cofounder of Shadowfax, explained the rationale behind these changes. He stated that the company repriced the issue to broaden investor participation. "We wanted to get the right set of investors from a long-term partnership standpoint," Bansal told TOI in an interview. "We thought this is a great value for investors to come in."
Bansal emphasized that becoming a listed company provides confidence to stakeholders about business stability. He added, "It helps us gain long-term contracts with our customers." Despite the reduction, the implied valuation remains higher than Shadowfax's last official private valuation of about Rs 6,000 crore.
Market Conditions Driving Adjustments
The broader market environment is challenging for IPOs. The Sensex has declined about 2% year-to-date due to several factors:
- A delayed US-India trade deal
- Ongoing geopolitical tensions
- Strong selling by foreign funds amid a weakening rupee
Dharmesh Mehta, MD & CEO at Dam Capital, highlighted the significant gap between private and public market valuations. He noted that secondary markets are correctly pricing IPOs in the current climate.
"In the broader markets, the mid-cap and small-cap index have corrected big time," Mehta said. "That will impact IPO valuations and the doability of IPOs to an extent. Unless the geopolitical issues settle, markets will remain volatile."
Amagi Media Labs Also Reduces Valuation
Shadowfax is not alone in this adjustment. Amagi Media Labs, which became the first new-age company to head to Dalal Street this year, has also significantly reduced its IPO valuation. The company now targets a valuation of Rs 7,810 crore, which is substantially lower than its last valuation of $1.4 billion (over Rs 12,000 crore).
Future Outlook for New-Age IPOs
Despite the current challenges, Mehta expressed optimism for certain startups. He believes that new-age companies demonstrating both scale and profitability will still see their IPOs succeed. "For new-age companies that can show scale and profitability, IPOs will sail through, and the recent listings have been decent," Mehta stated.
The trend of valuation adjustments reflects a more realistic approach from startups entering public markets. Companies are prioritizing long-term investor relationships and market stability over aggressive valuation targets. This shift could lead to more sustainable public market debuts for India's startup ecosystem.
