Instacart taps Goldman Sachs to lead IPO at $30 billion valuation: Report

 By Joshua Franklin and Anirban Sen

(Reuters) - Instacart has picked Goldman Sachs Group Inc to lead its initial public offering (IPO), which could come early next year and value the U.S. grocery delivery app at around $30 billion (£23 billion), people familiar with the matter said on Thursday.

Instacart was valued at $17.7 billion last month, when it raised $200 million in a private fundraising round. Were the IPO to push Instacart's valuation to close to $30 billion, it would underscore the rapid growth of its business as more consumers turn to it to shop for groceries during the COVID-19 pandemic.

The San Francisco-based company is accelerating its IPO plans after voters in California backed a ballot proposal last week that upheld the status of app-based delivery drivers as independent contractors. This was a boost for the likes of Instacart and Uber Technologies Inc , which rely on people to work independently and not as employees.

The sources requested anonymity because the IPO preparations are confidential. Instacart and Goldman Sachs declined to comment.

Instacart has been expanding its delivery business to non-grocery goods, serving customers of major stores such as Walmart Inc , beauty product retailer Sephora and convenience store 7-Eleven.

Launched in 2012 and led by its co-founder Apoorva Mehta, Instacart's order volumes have surged as much as 500% this year, as consumers shopped online during the coronavirus outbreak.

Instacart's investors include venture capital firms Sequoia Capital, Andreessen Horowitz and D1 Capital Partners, according to PitchBook data.

Several Silicon Valley unicorns are preparing for their stock market debut in the next few weeks, including home-rental startup Airbnb Inc, online retailer Wish Inc and food-delivery service DoorDash Inc.

Goldman Sachs slashes India's FY21 real GDP growth forecast to 1.6%

Goldman Sachs expects the global economy to sink into recession in 2020 and sees the coronavirus (Covid-19) pandemic–hit global gross domestic product (GDP) come in at a negative 1.8 per cent in 2020. The latest forecast is a 5 percentage point (pp) downward revision since early this year and around 3 pp lower than the March 22 forecast.

For India, the global research house has lowered its real GDP forecast to 1.6 per cent in financial year 2020-21 (FY21) from 3.3 per cent earlier. This, however, is still higher than United States, which it now sees contracting to -6.2 per cent in 2020 (from -3.7 per cent earlier).

“We now expect sequential real GDP growth (quarter-on-quarter seasonally adjusted and annualised rate) of -1.4 per cent in Q12020 (revised down from 3.5 per cent), -3.8 per cent in Q2 2020 (revised down from -2.0 per cent), +2 per cent, 7.5 per cent in Q3 and Q4, respectively, and further strong gains of +11 per cent in Q1-2021. This takes our FY21 GDP forecast down to 1.6 per cent on an annual-average basis," wrote Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist in a co-authored report with Prachi Mishra.

Goldman Sachs, like most other research houses, expects a strong economic recovery in the second half of FY21. This, they said, is based on three assumptions. First, the three-week nationwide lockdown is expected to be removed only in a staggered fashion. As a result, social distancing measures will help reduce new infections over the next four – six weeks. While the fiscal easing so far has been limited, they do expect more fiscal measures by the central and the state governments.

“We expect the RBI to continue with its monetary easing policy, along with liquidity infusion measures. While more forceful policy support could present some upside risk, the recovery could further be delayed if the pandemic is not brought under control globally and domestically over the next few months,” Tilton and Mishra wrote.

Despite the policy support so far, and expectations of more, Goldman Sachs believes the nationwide shutdown, and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in March, and in the first quarter of FY21. That said, 1.6 per cent growth for FY21 would be deeper compared to widely perceived ‘recessions’ India has experienced in the 1970s, 1980s, and in 2009.

"Notably, as our global team has argued, the global COVID-19 crisis — or more precisely, the response to that crisis — represents a physical (as opposed to purely financial) constraint on economic activity that is unprecedented in post-war history.

Sector-wise assessment

Among sectors, Goldman now expects a larger hit – up to 95 per cent – on recreation and culture, and restaurant and hotels sectors (versus earlier estimates of 70-80 per cent) and increased the hit to education services up to 80 per cent (versus 60 per cent earlier).

“Overall, consumption contributes 60 per cent to Indian GDP. Our assumptions about consumption cutbacks in these categories imply a monthly hit to the level of annual GDP of around 1.2 per cent, for each month the lockdown is in place. These calculations imply a peak hit to the level of monthly GDP of 14.8 per cent, through consumption spillovers. These effects obviously appear very high; in our growth forecasts, we assume these effects to be partial, given that the enforcement of even the nationwide lockdown is not complete, and we assume a staggering exit from the lockdown,” Goldman Sachs said.

Vijay Karnani, Goldman India co-head, to retire after 21 years: Report

Goldman Sachs Group Inc.’s co-head for India business, Vijay Karnani, is retiring from the bank after 21 years with the company, according to a memo seen by Bloomberg News.

Karnani joined Goldman Sachs in 1998 as an associate in equity capital markets and moved to the equity derivatives team in Hong Kong in 2000, the memo shows. He became head of the bank’s securities business in India in 2009 and co-chief executive officer two years later. A spokesman for the New York-based bank confirmed the content of the memo and said that Karnani will be retiring at the end of 2019.

Sonjoy Chatterjee, chairman and co-chief executive of Goldman Sachs in India, will become the sole head of the business in the country, the bank’s spokesman said.

US equity outflows to cash, bonds biggest since 2008: Goldman Sachs

The outflow from US equity funds this year has been the biggest since 2008, relative to the flood of money into cash and bonds, according to Goldman Sachs Group Inc.

That still leaves cash exposures “near historical lows,” according to Goldman strategists led by David Kostin. At 12 per cent, the aggregate allocation to cash is only in the fifth percentile of the past 30 years, they calculated.

“High uncertainty, investor fears of a recession, and low starting cash allocations will likely limit a significant increase in equity allocations” in 2020, the Goldman team wrote in an Oct. 25 note.

Just like this year, corporate demand will be the top source of US equity buying in 2020, Goldman projected. While buybacks may drop, net demand is still seen as strong thanks to diminished initial public offerings and a rise in cash-based mergers and acquisitions. Households and foreign investors will also be net buyers, while pension funds keep whittling down their allocation, as they have since 2009, Goldman said.

Among the bank’s 2020 forecasts:

Net corporate purchases for US equities will total $470 billion in 2020, down 2% from this year

Foreign investors will buy a net $50 billion

Households will add a net $30 billion

Purchases by exchange-traded funds will be a net $150 billion, less than the five-year average of $220 billion

American stock funds have seen $100 billion of outflows so far in 2019, on pace for the second-largest drawdown in 15 years, with actively managed mutual funds seeing a $217 billion exodus, according to data compiled by Goldman. Bonds have enjoyed a $353 billion inflow, while cash has seen a $436 billion influx, the Goldman analysis showed.