Some zing and freshness in recent IPOs

Thillai Rajan A/Madhavan Nampoothiri | Updated on October 07, 2021

While Zomato scores on the cost front, Freshworks does better in price discovery and processing speed by listing in the US

Going public is the holy grail for start-up founders. Not only does going public create enormous wealth for the founders and the team, it also indicates significant credibility and public acceptance of the company. Coming out with an IPO is and would remain an aspirational goal for start-up founders.

Start-ups going public is nothing new in the US and other markets. However, in India, instances of start-ups going public have not been that frequent. Therefore, when a start-up goes public, and if the offer size is significantly large, public adulation is spontaneous.

The situation was no different when Zomato, the restaurant discovery and online food delivery platform, came out with one of the largest IPO offers in India recently for ₹9,375 crore ($1.3 billion).

During the launch of Shifting Orbits, a publication on the India’s start-up ecosystem, , Amitabh Kant, the CEO of NITI Aayog, proclaimed Zomato’s offer as the success of “atmanirbhar capital” — meaning start-ups need not rely any longer on overseas markets. Indian capital markets truly have the depth to the support the funding requirements of innovative start-ups, he inferred.

In about 60 days of Zomato going public, another start-up with Indian roots, Freshworks, went public in the US. The size of both the offers were similar, and both the companies were comparable in terms of age and revenues at the time of going for IPO (Table 1). However, the contrasting routes that both the start-ups took to access public capital encouraged us to compare the pros and cons of “atmanirbhar capital” vis-a-vis “pardesi capital”. Our comparison focussed on the following critical parameters of a public offering: quantum, cost, price, and speed. Table 2 provides the salient features of the IPOs of Freshworks and Zomato.


That overseas capital markets have depth is well known. What Zomato IPO has demonstrated is that Indian capital markets too have the depth to raise large amounts of capital. However, it is important to bear in mind the following: Firstly, as they say, the early bird catches the worm. Whether the Indian capital markets would be able to support a continuous stream of such large offers from start-ups remains to be seen.

And, secondly, as the Zomato IPO indicates, even when the offer is made in domestic markets, a significant portion of the capital is from overseas. For example, foreign institutional investors accounted for 53.4 per cent of the total bids received for the shares of Zomato.


Significant upfront costs are incurred in the IPO process. The lower it is, the more beneficial it would be for the company, as more capital from the funds raised would be available for the company. On this aspect, Indian capital markets score high.

Being a cost conscious economy, the upfront IPO costs incurred are much lower in India. The cost of the IPO was 278 basis points lower for Zomato as compared to that of Freshworks. This translates to a saving of ₹27.8 crore for every ₹1,000 crore raised.


The success of an IPO can be measured on many parameters. One of the important measures is “the money left on the table”.

The higher the listing day gains means higher is the money left on the table. While higher listing day gains would be welcomed by investors in the IPO, it may not be good for the issuing company since the higher listing gains indicate that the firm has sold its shares for a lower price than what the investors were prepared to pay for it.

Thus, the company could have potentially sold lesser number of shares for raising the same amount of capital or raised more capital for the same number of shares by pricing the issue appropriately. The lower listing gains for Freshworks indicate that price discovery process seem much more efficient in overseas markets.


The sentiment in financial markets can change quickly. Preparing for an IPO process is akin to an aircraft taking off. Once the process starts, aborting it mid-way can be costly — and could even impact the survival of the company. The longer it takes to complete the IPO process, the higher is the risk for the company.


The quantum of capital raised by Zomato and Freshworks are very similar. However, Freshworks has been able to complete the IPO process at about half the time it took for Zomato.

A deeper dive reveals that the regulator (US SEC) approval for Freshworks took 25 days from the date of filing with the regulator, whereas it took 66 days for Zomato to get the approval from SEBI.

Interestingly, Freshworks opened on Nasdaq the day after SEC approval, while it took another 20 days for Zomato to get listed after the SEBI approval.

In sum, on the four important parameters of quantum, cost, price and speed, “atmanirbhar capital” has a definite edge in terms of cost. However, there is much ground to be covered on the other dimensions.


When Girish Mathrubootham, CEO and Founder of Freshworks, rang the Opening Bell of Nasdaq in celebration of its IPO on September 22, it reminded us of the immortal lines of John Donne: “Ask not for whom the bell tolls. It tolls for thee.”

Rajan is Professor, Centre for Research on Start-ups and Risk Financing, IIT Madras, and Nampoothiri is a Ph.D. Scholar in the Department of Management Studies, IIT Madras

Published on October 07, 2021

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