Brokerage Firm Zerodha Won't Go For An IPO In This Bull Market – CEO Nithin Kamath Explains Why

Nithin Kamath took to micro-blogging site Twitter and said that in the current market, start-ups are already getting priced to perfection based on all the future growth potential.

(Representative Image/Getty)

New Delhi: Amid the ongoing initial public offerings (IPO) of several digital start-ups of the country, including Paytm, PolicyBazaar, Nykaa and others, founder and CEO of online trading platform Zerodha Nithin Kamath has expressed his desire of not initiating IPO for his company in this bull market.

Earlier this week, digital payments and financial services platform Paytm made history by closing the bid/offer for its IPO by being 1.89 times oversubscribed.

Likewise, lifestyle-focused consumer technologies platform Nykaa also witnessed a bumper opening as its IPO catapulted its promoters — the Nayar family — as one of India's richest self-made billionaires.

Commenting on the trend, Kamath took to micro-blogging site Twitter and said that in the current market, start-ups are already getting priced to perfection based on all the future growth potential.

He also pointed out that for a stock to do well, a company needs to outperform.

"Why not IPO @zerodhaonline when you can potentially get ridiculous valuations? Firstly, we think an IPO is the beginning & not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially," Kamath wrote in a series of tweets.

Why not IPO @zerodhaonline when you can potentially get ridiculous valuations?
Firstly, we think an IPO is the beginning & not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially. 1/4

— Nithin Kamath (@Nithin0dha) November 12, 2021

 

In another tweet, the young entrepreneur also noted that as a CEO, he dreads to think how one can outperform the already really high expectations that growth companies have today.

"We have never set revenue or growth targets, always believed that if we can do what is right for the customer & if goddess of luck smiles, the rest will happen. Our core team dreads moving away from that philosophy to be in a chase all the time, which it will be after an IPO," Kamath said.

We have never set revenue or growth targets, always believed that if we can do what is right for the customer & if goddess of luck smiles, the rest will happen. Our core team dreads moving away from that philosophy to be in a chase all the time, which it will be after an IPO 3/4

— Nithin Kamath (@Nithin0dha) November 12, 2021

Further in his tweet, Kamath said that the IPO chase is scarier as the market is unpredictable and it is not possible for someone to project what the Nifty Midcap index can do in 3 years.

"The reason the chase is scarier is that broking has hardly any predictability. When someone asks me for a 3-year projection, I usually respond, can you predict what the Nifty Midcap index can do in 3 years as everything from our user to revenue growth almost mirrors that," he said.