Helping You Build Wealth With Honest Research
Since 1996. Read On...

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Revealed
India's Third Giant Leap

This Could be One of the Biggest Opportunities for Investors




Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.

AD

Startup IPOs to hit D-street soon?
Mon, 6 Jul Pre-Open

The Indian startup space has seen huge activity in recent times. As per an article in the Business Standard, about 3,100 startups have received investor funding. Large well known ones like Flipkart have grabbed headlines. But there are many smaller ones that are also growing rapidly. Most of them though are not profitable yet. They have grown with the help of huge amounts of venture capital (VC) funds.

This business model is clearly not sustainable in the long run. As and when these firms start turning out profits, the VC investors will look to exit. The preferred mode would ideally have been via IPOs. However, as we had written in the 5 Minute WrapUp a few months ago, startups like Flipkart will face problems listing in India. This is because India's IPO rules are quite strict when it comes to firms that are not profitable. But market regulator SEBI has announced a new institutional trading platform for startups. Will this lead to a flood of startup IPOs? Not quite.

The reason is multi-fold. India as yet does not allow FDI in multi brand retail. Thus, these firms operate as marketplaces and many are registered in Singapore. Under the old rules or the new ones, listing a Singapore firm would have been hard enough. Then there are FEMA regulations that have to be complied with. Foreign investors in such firms would also face trouble taking back their money abroad due to capital convertibility issues. SEBI's new platform does not solve any of these problems. In fact, the new rules require at least 25% of pre-issue capital to be held by qualified institutions. It is not clear how many Indian startups satisfy this criterion.

Thus, we would not be surprised at all if these firms were to ignore Indian markets and list on the NASDAQ in the US. Would this really be a bad thing? Not according to us. We believe, as long as these firms do not have a strong moat around their business, they would be high-risk bets for retail investors. If some of these startups were to eventually list on the Indian markets, retail investors would be well advised to be extra careful when evaluating their IPOs. It might make sense to completely avoid them.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Startup IPOs to hit D-street soon?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited).

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.