Startups IPO valuations are stretched: IIFL Chairman Nirmal Jain

moneycontrol.com:

Discussing the IPOs of startups like Mamaearth, the IIFL Chairman shared that he had a sombre view of such firms due to their vertiginous valuations.

Honasa Consumer, which runs the popular skincare brand Mamaearth, recently filed its Draft Red Herring Prospectus (DRHP) in order to raise funds via an initial public offering (IPO). Last June, a Reuters report had said that the Sequoia- and Sofina-backed company was valued at $3 billion (roughly Rs 24,000 crore),  and commanded a PE multiple of 1,714.3.

“A lot of capital is chasing these startups and valuations have reached a point where a meaningful return is unlikely, so one has to be very selective,” said Jain.

Asked about new-age brokerages like Zerodha and Upstox, Jain said that while some will do very well, some will not survive.

He added that those who survive will make a mark, and some of the legacy firms  will also adapt to the technology and grow, leading to a change in the pecking order.

Jain said that the industry has seen significant structural change over the past 20 years thanks to consolidation, technology, regulation, and the entry of large players.

He highlighted that new-age players would have to learn more about risk management and compliance in order to survive,  since regulations were changing at a rapid pace and regulators were becoming very stringent .

Stating that he has no one mentor, the industry veteran acknowledged that he had learned a lot from ace investors like Motilal Oswal, Raamdeo Agrawal, Rakesh Jhunjhunwala, and Ramesh Damani.

Jain also spoke of his love for teaching, taking long walks, and spending time with the family.

Nickey Mirchandani:

You started your career with HUL, worked with Agrawal for a bit, and eventually co-founded IIFL and became