The value of startup holdings by mutual fund companies such as ICICI Prudential, Axis Mutual Fund, Kotak Mutual Fund, HDFC Mutual Fund, Nippon Mutual Fund, Invesco India and Mirae Asset Mutual Fund was $2.7 billion a year ago, but only with six companies versus 12 now, calculations made by ET show.
Besides the steady climb in stock prices that companies such as Gurgaon-based Zomato and Policybazaar-parent PB Fintech have witnessed in the last year, a clutch of new-age companies doing their initial public offerings (IPO) has led to the increased exposure by domestic mutual funds to this asset class.
In 2024, six startups – Go Digit General Insurance, Ixigo, Awfis, Unicommerce, Ola Electric and FirstCry – have gone public so far.
IPOs in the pipeline include Bengaluru-based food and grocery delivery firm Swiggy, digital payments platform Mobikwik, electric two-wheeler maker Ather Energy, truck aggregator platform Blackbuck and third-party ecommerce logistics firm Ecom Express.
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The rising exposure by mutual funds in new-age companies assumes significance, given the growing influence of this institutional investor class during the pre-IPO rounds, industry insiders said.
“During the anchor allocation rounds, large foreign investors typically tend to closely watch how domestic mutual funds are participating. That sends strong signals,” said the founder of a new-age company that plans to go public next year. “Even in pre-IPO roadshows, mutual funds have become a key investor class to get on board for an issue to be successful.”
For some of the companies that have gone public this year, market participants said the mutual fund holdings could further increase as venture capital investors offload stakes post the mandatory lock-in period.
“We have seen that happen with the likes of Zomato, Delhivery (and) Policybazaar as well… When private equity or VC firms start selling through bulk deals, mutual funds will pick those shares up,” a senior Mumbai-based capital markets executive at a mutual fund house said. “For the foreign investors who look for greater multiples, they would have to sit on these stocks for a longer time. Domestic mutual funds will price in certain growth levels and enter these stocks at the right valuations.”
Taking bets
Three-fourths of the total value of MF holdings across these 12 companies, or nearly $6 billion, was held by mutual funds in Zomato, omnichannel beauty and fashion retailer Nykaa, and PB Fintech, as per calculations made by ET.
Fund houses including ICICI Prudential, Axis MF and Kotak MF held 13.75% stake in Zomato as of September 30. This is worth nearly $4 billion as of Tuesday.
As of September 2023, mutual funds had a 10.56% stake in Zomato that was worth $1.1 billion. Zomato’s stock price has doubled in a year with brokerage firms pricing in the rapid growth of the company’s quick commerce unit Blinkit.
Similarly, in Mumbai-based FSN Ecommerce Ventures, the parent company of Nykaa, mutual fund houses held a 17% stake worth $1.1 billion as of September 30 this year. In the last year, mutual funds increased their stake in Nykaa from 10.62% as of September 2023.
PB Fintech, which has also been on a bull run owing to a strong financial performance, with two quarters of net profit, steady revenue growth and expansion in new insurance premium collection business, also saw mutual funds add more stock of the company to their holdings.
As of June 30 this year, mutual fund houses including Franklin Templeton, Axis MF and HDFC MF held 10.9% stake in the company worth almost $1 billion. The company has not yet filed its latest shareholding pattern with the BSE.
As of September 30, 2023, mutual funds held 7.83% stake in PB Fintech.
