Indian Tech Startups Find Comfort Listing In Home Markets

Significant coordinated efforts by industry, government and regulators in the past three years have led to this day wherein we are witnessing blockbuster IPOs from this new genre of businesses

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The Indian startup unicorn story is undergoing a massive transformation. The year 2021 is turning out to be that year when Indian consumertech unicorns are boldly stepping forward to undertake their long-talked about IPOs. This has not only been widely welcomed by the booming tech space but is also proving to be an inflection point for wealth creation to happen within India. As the number of these tech startups grow to become unicorns, there is a huge line up for IPOs which is also translating into a new chapter in India’s primary markets. Listing has been a goal that each startup chasing the big billion dream that it aspires to attain. While tech startups, before the consumer tech era ushered, struggled with little choices when it came to listing options due to their inability to list in India, the landscape today has drastically evolved over the years, cutting down significant offshore set-up costs for Founders.


The recently released Hurun India Future Unicorn List 2021 on 2 September 2021 ranks startups founded in 2000s, with a worth of at least $200 million, or INR 1,500 crore. India is listed as the third largest unicorn system in the world with 51 unicorns, 32 gazelles and 54 cheetahs. However, back in 2018, the regulatory landscape for Indian Main Board listings was not necessarily the most conducive for tech startups and entrepreneurs especially those that were not profit making in nature. In order to grow businesses rapidly, acquire customers, internet companies but naturally underwent multiple rounds of capital infusion. However, there were significant roadblocks for these companies to raise equity or undertake public offering of securities in the Indian capital markets unlike their counter parts in other parts of the world.

The business model of these companies (as also seen in other jurisdictions such as the US, China and Europe is to primarily focus on acquiring customers in different markets, then grow revenue or gross merchandise value (GMV) in order to rapidly scale the business in the initial years, and subsequently aim to generate profits. While these companies successfully attract equity investment from investors, there were requirements that these business models would not be able to meet if they desired to list on the Main Board of the Indian Stock exchanges which were originally written for brick-and-mortar or manufacturing companies. Considering that the regulatory framework in other jurisdictions were and to some extents still are more favorable to such business models and certain companies in this space may still opt for undertaking a public offering on international stock exchanges. This would simply translate to wealth being created in other jurisdictions, basis the performance of the business in India.

Today, India’s tech unicorns have garnered considerable attention from across and seem to now enjoy a significant groundswell of support from retail investors who are more than desirous to be part of this new age story. Significant coordinated efforts by industry, government and regulators in the past three years have led to this day wherein we are witnessing blockbuster IPOs from this new genre of businesses. All these aspects led to a conducive environment that led to listing becoming a reality wherein options to work around profitability, fixed assets, promoter definitions, lock-ins, no promoter listings etc. led to recent IPOs becoming possible and many more underway. The framework for Differential voting rights (DVRs) also gave the much needed shot in the arm for founders desirous of retaining control. However, one particular requirement of minimum promoter holding requirement of 20 per cent remains which is unlike any other jurisdiction and a dilution of this minimum requirement for new-age high growth technology companies can significantly open the flood gates of investments coming to India. 

A reduction in minimum promoter requirement of 20 per cent can be offset by the DVRs which will ensure that the founders are able to duly run their businesses like their overseas counterparts. This can ensure that most Indian unicorns will list in India and create wealth within India and will have lesser incentive and motivation to list abroad. This can also significantly improve India’s ‘ease of doing business’ rankings and boost tax collections while allowing domestic investors to own a piece of this emerging class of companies.

If we look at the New York Stock Exchange which started with the primary aim of encouraging technology companies to list on its platform. Today, it is the second-largest stock exchange in the world by market capitalization and lists over 3,300 companies. It is therefore an opportune time for India to further open up listing regulations to ensure we are able to tap significant wealth while enabling Indian founders to retain control and run their ship as desired.