Start-ups ready for scrutiny, tiger-ride should go public: Industry experts

Companies wanting to go public to raise money from the market should weigh the pros and cons, said Nazara Technologies CEO Manish Agarwal

: Industry honchos on Thursday said entrepreneurs and start-ups should be ready to ride a tiger and also be under the constant quarterly radar if they want to raise money from the capital market.

Participating in a session IPO opportunity and Challenges for Startups' at the Bengaluru Tech Summit 2021, Manish Agarwal, CEO, Nazara Technologies, said companies wanting to go public to raise money from the market should weigh the pros and cons before doing so.

He said companies should be willing to go under the scanner as is the norm of the market regulator to be upfront on all issues pertaining to the running of the company.

 

Agarwal said it is a myth that selling shares by promoters means unlocking shareholder value. He said such moves should be followed or preceded by proper signaling and a narrative that is conducive to investment.

Nipun Goel of India Infoline Finance Ltd said listing the company's shares provides financial flexibility to companies and is a tool to fund acquisitions to further growth.

He informed the gathering that the process of going public takes six to seven months for companies who want to take the Initial Public Offering (IPO) route.

Companies are also looking at higher valuations as they raise capital to fund their growth and business activities, he said.

Goel said loss-making companies are allowed to list on the markets and the regulators are constantly scrutinising the financials in the pre-IPO and post-IPO scenarios.

"The bigger the issue size better it is for the companies as they go about raising money via the capital market. Markets have become institution-driven and mutual funds have become big and so a small-sized IPO is challenging for the companies wanting to raise money," Goel said.

Salil Pitale of Axis Capital said for the small companies IPOs mean currency to achieve growth.

According to him, companies wish to take the IPO route as most of them are of the view that it is the path to profitability.

However, the constant scrutiny of the performance of the company post-IPO is something that the promoters should be willing to take questions from shareholders on the decisions impacting all of them, he said.

Pitale said it is necessary for promoters to communicate why they were offloading their stakes with justifiable reasons. However, worldwide it is seen that in tech companies stakes held at promoters may not be a large percentage to warrant any untoward reaction if they decide to sell a percentage of their holding.