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The Securities & Exchange Board of India (SEBI) recently set up the Innovators Growth Platform, encouraging Indian tech startups to list themselves on the market for IPOs. This is seen as a welcoming move by the Indian government and the markets.
Apart from Zomato, 3 other Indian startups who have been eyeing the IPO pie in 2021 are Policybazaar, Nykaa and PharmEasy.
While all 3 companies plan on listing their IPOs in Mumbai, they might consider dual listing with countries with friendlier public listing rules like the USA or Singapore for a global reach. But it could be a challenge for Policybazaar as India continues to prohibit this for sensitive sectors like financial services.
Dual listing might also lead to a wider spread of their liquidity. This could lead to higher taxation and compliance costs.
Poor financial health could act as a deterrent to investors. All major tech-based Indian startups, including Zomato, PharmEasy, Nykaa and Policybazaar continue to record losses despite their revenues seeing a massive jump.
While SEBI allows loss-making entities to go public, the Issue of Capital and Disclosure Requirements (ICDR) regulations requires these companies to allot at least 75% of their shares to qualified institutional buyers, including insurance, mutual fund companies, and alternative investment funds. This means only 25% remains available to HNIs and other investors.
With increased funding, these companies can invest worry-free into newer technologies and explore innovative solutions to challenges faced by their markets.
Injection of additional funds means these companies can cut their losses and break even sooner than their targeted time period.
With investors from varying fields coming into play here, the IPO opens up many new markets for these companies. With more and more people getting to know about these companies, their customer base will increase and they can further reach out to smaller cities.
With IPOs driving up investments into these startups, they can further explore valuable collaborations with similar brands and service providers to introduce new products and services to their customers. And companies like Nykaa who have their own inventory and branded products too, can boost their production and push their products more on their platform.
Higher valuation and new investments mean the companies are going to expand their operations to newer cities. And to serve these new bases, they’ll grow their teams, creating new jobs and increasing the employment rate of these cities and states.
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