should be the direction larger unicorns should take. Over the next five years, there should be a start-up index too,” said Ashish Fafadia, partner at early-stage venture capital (VC) firm Blume Ventures.
Recent media reports suggest that e-commerce major Flipkart
is preparing for an overseas listing as early as 2021. This could potentially value the firm up to $50 billion. Flipkart’s IPO, in fact, has been pending for quite some time.
“Walmart’s only loss has come from Flipkart, which did gain traction during the pandemic, but has not been able to resurface on the books. Flipkart’s marketplace and wholesale business saw their losses rising more than 69 per cent in 2019 to Rs 5,459 crore. The only way Flipkart
can stand against the likes of Amazon is with an IPO,” said Somdutta Singh, founder and CEO of e-commerce management firm Assiduus Global.
However, going public may prevent valuations from growing as fast as they did before the listing. “The upside is that companies
will be focused on fine-tuning their business models and ensure profitability,” said Fafadia.
Some of these companies
are also expecting to raise capital from the public markets, given the VC and private equity investment in the start-up space have taken a hit during the pandemic, especially in sectors outside online education and commerce. Moreover, an end to funding from Chinese investors, such as Alibaba and Tencent, is also expected to be another reason.
“Larger companies, such as unicorns, are interested in expanding their funnel for sources of large amounts of capital they need for their journey. By accessing the public markets, they are looking to open up another pool of capital. This is also crucial in light of the recent norms restricting investments from Chinese players,” said Anup Jain, managing partner at Orios Venture Partners.
Some start-up players, including Flipkart and PolicyBazaar, have evinced an interest to list overseas. While online insurance company PolicyBazaar is eyeing a Nasdaq listing by September next year at a valuation of $3.5 billion, Flipkart is likely to choose between Singapore or the US for an IPO.
The current legal framework doesn’t allow Indian companies to directly list overseas, before getting themselves listed on the Indian stock exchanges. Hence, many companies, such as MakeMyTrip, have set up parent entities in other countries to be eligible for a foreign listing. Further, companies like Reliance Industries and Infosys have used the American Depository Receipt/Global Depository Receipt route for accessing foreign capital.
With the Lok Sabha passing the Companies (Amendment) Bill, 2020, on Saturday, public companies will now be allowed to list certain class of securities in foreign jurisdictions.
“Companies with international branding and market value can initiate listing on foreign stock exchanges under this norm. In the long term, this will be a positive step. It will help Indian companies to be more self-reliant in terms of capital,” said Salman Waris, managing partner at specialist technology law firm TechLegis Advocates & Solicitors.