Kissht, Ola Electric & More: Why Listed Startups Keep Going Back To The Well
by Debarghya Sil · Inc42- Added to Saved Stories in Login
Barely four months after making its stock market debut, digital lending platform Kissht is back in the public markets for more funds.
Kissht’s parent OnEMI Technology Solutions has received shareholder approval to raise up to ₹832 Cr through a preferential issue of equity shares. The proposed fundraise comes after the company raised around ₹926 Cr through its IPO, including a fresh issue of shares.
Kissht intends to utilise 75% of the new proceeds to fund its lending arm Si Creva, with the money expected to support its loan-book growth. The rest for general corporate purposes.
The preferential issue a few months after listing has raised some eyebrows among market observers. But Kissht is not the only one going back to the capital markets after going public.
Over the past couple of years, several tech companies have returned to the equity markets after going public. While most opted for Qualified Institutional Placements (QIPs), others have used preferential issues or rights issues. Thus far, new-age listed companies have not gone for a follow-on public offer or FPO.
Swiggy raised ₹10,000 Cr through a QIP around a year after its listing. Ather Energy raised ₹1,300 Cr through a QIP roughly 14 months after its IPO, while Ola Electric raised ₹780 Cr less than two years after listing, also through a QIP.
Zaggle, RateGain, Nazara have also tapped institutional investors through QIPs. Travel tech company ixigo raised around $146 Mn through a preferential issue roughly 16 months after its listing.
For companies that spent years raising successive private rounds, the public market is now emerging as another source of follow-on capital. Analysts also point to the relatively high OFS component in some new-age IPOs, where existing investors got an exit while the businesses themselves raised a relatively low amount of fresh capital. Even where fresh capital was raised, a lot of it went towards debt servicing.
Now, the short gap between IPO and another equity raise is raising questions around capital requirements, dilution and how companies are deploying money raised from public investors. Is the need for funding that was a prominent hallmark of Indian startups before their IPOs now trickling into their post-listing lives?
Why Are Startups Raising So Soon After IPOs?
Avinash Gorakshakar, a senior market analyst observing the market over a decade, said, new-age companies are still working on innovation and expanding their user bases, while debt brings servicing requirements and leverage restrictions, which demand free cash flow.
But the preference for equity does not necessarily point to weak cash flows or an inability to borrow.
For growth-stage companies, raising debt comes with commitments around interest payments and repayment obligations, while raising funds through a preferential issue or QIP adds to the permanent capital base. This is particularly relevant for companies that are still investing heavily in growth and may take longer to generate cash from those investments.
Look at the companies raising through QIPs or preferential issues. The likes of Ather, Ola Electric, Swiggy, Nazara, ixigo operate in sectors and segments that may need fresh capital to upgrade manufacturing, the technology base, expand into new product areas and for market share expansion. These are companies that would have typically turned to debt for such capital if their cash flow situation was more predictable and consistent.
Sandeep Gogia, managing director and co-head investment banking at Equirus Capital said equity can provide companies the capital foundation without obligations, allowing them to fund opportunities where cash generation may take longer or be less predictable.
For Kissht, this distinction is particularly relevant because fresh equity can strengthen its lending business, while it scales up its other verticals such as its payments vertical. With MDR now coming in, Kissht has all the incentive to leverage growth in the NBFC business to fuel its other segments.
The timing of the raise can also be influenced by the fintech company’s stock price.
Kissht is raising ₹832 Cr at ₹314.11 per share, against its IPO price of ₹171. Shares have risen sharply since listing, so now the company can raise capital by issuing fewer shares. “The attraction of equity over debt arises when the startup’s valuation is strong. In this case the stock has almost doubled in the last 4-5 months since listing and a higher share price means it can raise the given amount with less dilution,” Gogia added.
The valuation logic can apply to most of the other new-age companies when business growth outpaces the assumptions made during the IPO.
Gorakshakar said companies often pare down their initial IPO fundraising targets to improve the chances of successful listing. If growth accelerates after listing, the money raised during the IPO can get absorbed faster than management had planned, leading to an earlier return to the market.