Analysts said startup owners looking for an initial public offering may need to lower their valuation expectations. — The Jakarta Post
JAKARTA: A dozen or so Indonesian tech startups are expected to go public by 2027, thanks to improved profitability and early investors’ desire to cash out, according to new research.
However, analysts said investors will be more selective in the current high-interest-rate environment, meaning startup owners looking for an initial public offering (IPO) may need to lower their valuation expectations and see a path to profitability of no more than six or 12 months.
According to research from management consulting firm Redseer, there were 42 unicorns (startups with a valuation of US$1bil or more) and 150 “soonicorns” (startups with a valuation close to US$1bil) in South-East Asia as of last year.
Of these unicorns, 19 booked positive earnings before interest, taxes, depreciation and amortisation (Ebitda), while 16 others had at least narrowed their losses.
The rest saw their losses widening with no active rectification measures, according to Redseer’s study, which has not yet been published.
“When we look back at 2019, there were only 14% profitable unicorn companies, and now we are looking at almost 45%. That is a very encouraging trend.
“The healthy pipeline of unicorns should be headed toward an IPO,” Redseer South-East Asia partner Roshan Raj told The Jakarta Post.
Profitability aside, Roshan said that most of those unicorns and soonicorns had gained that status around 2017.
They were backed by private investors, whose funds typically would be looking for an exit after seven to 10 years, he added.
“On a very comfortable level, we think 29 companies should be headed for IPOs by 2027, with another 11 companies somewhere in the gray zone in terms of their business size and profitability also eyeing the public market,” Roshan added.
The startups in question operate in various sectors, Roshan said, from eCommerce players with a sizeable presence in the region, like Lazada, to financial technology firms with good unit economics just waiting for the market to correct.
Other potential IPO candidates are direct-to-consumer companies catering to international markets and online travel agents reviving after the pandemic, according to the analyst.
“And then, of course, logistics. Some of them will be looking at what happens to J&T with its upcoming IPO,” Roshan said.
According to Redseer’s data, nine unicorns and three soonicorns from Indonesia are on that list.
Antonio Puno, head of South-East Asia investment banking at Bank of America, said that Indonesian unicorns could get listed much sooner, depending on current global market conditions and how quickly those companies moved towards profitability.
Signs of the recovery of the US IPO market could pave the way for Indonesian startups.
“Given the volatility in Chinese stocks and the general inaccessibility of Chinese tech names, there is strong interest in deploying funds in South-East Asia,” Puno told the Post on Tuesday.
However, he pointed out that startups with aspirations to go public needed to make sense of their valuation in the context of global comparison.
William Setiadi, executive director at Goldman Sachs’ investment banking division, said that South-East Asia was flush with liquidity and that there was always money around for investments.
“The reason we haven’t seen a lot of IPO deals is more about the difference between what the founders are willing to transact and what the investors are willing to pay,” William said. — The Jakarta Post/ANN
