Asia ex-China tech IPOs thrive

IFR Asia 1197 - 24 Jul 2021 - 30 Jul 2021
5 min read
Fiona Lau, S Anuradha

The absence of big China technology IPOs has prompted global investors to look at investment alternatives, with recent tech IPOs in the rest of Asia, from South Korea to India, all seeing tremendous foreign demand.

South Korea's largest digital-only lender Kakao Bank, Indonesia e-commerce company Bukalapak and Indian food delivery Zomato last week all priced IPOs at the top of price ranges to raise W2.55trn (US$2.26bn), Rp21.9trn (US$1.5bn) and Rs93.8bn (US$1.26bn), respectively.

All three received overwhelming demand, especially from foreign investors. A total of 380 international investors and 1,287 local institutional investors participated in Kakao Bank's institutional tranche, which was 1,733 times covered. Foreign investors bid aggressively for the shares, hoping they could secure some allocations. Around 95% of foreign investors placed orders above the top end of the W33,000–W39,000 range, or even did not specify any price limit, while only around 40% of local institutions did so.

Bukalapak's float drew US$6bn of demand from around 180 investors, with bids coming from international long-only institutions, sovereign wealth funds and domestic institutions.

Zomato was a similar story. Foreigners accounted for the bulk of the investors, taking 65% of the 552m-share anchor tranche, which attracted 186 investors, including Tiger Global Investments Fund, Kora Master Fund, Alkeon Capital Management, Altimeter Fund, Dragoneer Investments and Luxor Capital, who were all first-time anchor investors in an Indian IPO.

A Hong Kong-based banker said the slowdown in Chinese tech IPOs has generated more interest in South-East Asian issues and that, for instance, explains the better-than-expected performance of the Bukalapak IPO.

“South-East Asia usually benefits if the Chinese ECM market quietens but the Indian issuance space is quite independent with its own set of local and international investors,” he said.

Bukalapak's IPO, Indonesia’s largest ever, was upsized to Rp21.9trn from Rp16.2trn and priced at the top of the Rp750–Rp850 range. The pent-up demand for Asian technology stocks is underscored by the fact that when work started on the IPO early this year, the size was expected at just US$300m, just one-fifth of the eventual outcome.

International demand was equally strong for the Kakao deal.

“I haven’t seen such strong foreign interest for a Korean IPO for quite some time. Some global funds, which usually focus heavily on China, participated in the transaction,” said a banker on the deal. “I won’t say these funds are shifting their focus from China but they are definitely looking at opportunities in other countries, at least for now.”

Slowing down

There is little to look at from China at the moment. Home services provider Daojia has put a US$200m–$300m NYSE IPO on hold, following in the footsteps of other China-to-US listing candidates after Beijing tightened its grip on overseas IPOs.

“Basically almost all Chinese companies are delaying their US IPOs to see whether they can still push them ahead or need to switch to a Hong Kong listing,” said an ECM banker.

These companies include Spark Education, Atour, Horizon Robotics, Xiaohongshu, Ximalaya, Lalamove, Keep, Hello and Qiniu.

China proposed new rules on July 10 that require companies seeking to list in foreign countries to undergo a cybersecurity review.

According to a statement from the Cyberspace Administration of China, companies holding data on more than one million users must now apply for cybersecurity approval when seeking listings in other countries as there is a risk that foreign governments could control and exploit the data.

The consultation will end on July 25.

“Hopefully the final rules will come out in August so issuers can decide what to do,” said the banker.

While Chinese tech deals are marking time, bankers expect technology issues to accelerate in other countries.

India has the most robust pipeline with digital payments provider Paytm planning to launch the country’s largest-ever float of Rs218bn as early as October. Others include automobile marketplace CarTrade Tech (Rs20bn), online travel portal Ixigo (Rs18bn), logistics firm Delhivery (US$500m–$1bn), online personal care product retailer Nykaa (US$500m) and insurance aggregator PolicyBazaar (Rs40bn).

The strong debut of Zomato - opened 53% higher on Friday - has created a positive tone for those listings.

In Indonesia, the tech IPO pipeline includes local listings from Go To, the ride-hailing to e-commerce company formed as a result of a merger between Gojek and Tokopedia, and travel portal Traveloka.

The earlier expectation was that Indonesian companies would raise a bigger amount through an overseas listing by merging with a special purpose acquisition company and a smaller amount locally. “Bukalapak’s success has changed that mindset. Suddenly the Indonesian market seems to have enough depth,” the Hong Kong-based banker said.

Bank of America and UBS were the joint global coordinators and bookrunners with Mandiri on Bukalapak.

Credit Suisse and KB Securities are leading the Kakao Bank deal, with Citigroup as a joint bookrunner.

Credit Suisse, Kotak and Morgan Stanley were global coordinators, and bookrunners with Bank of America and Citigroup on Zomato.