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  • New institutional platform: prospective start-ups show little enthusiasm

    Quote by Rajeev Thakkar in The Hindu Business Line, June 24, 2015

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    Revised norms may help early stage units

    MUMBAI, JUNE 24:
    A day after capital market regulator SEBI announced easier listing norms for new-age technology-intensive companies under the new institutional trading platform (ITP), the response from both prospective start-ups and investors is less than enthusiastic.

    Preference for main board

    Abhimanyu Bhattacharya, Partner at law firm Khaitan and Co, said the regulator needs to identify what sort of start-ups it wants to target. “Mature start-ups, such as Flipkart and Snapdeal, which have reached a certain critical mass, may still prefer listing on the main board exchanges than through the ITP since the main board has facilities such as bulk and block deals, OFS (offer for sale) mechanisms that the ITP does not have. Or, they might choose to list abroad if valuations there are better.”

    “Right now, the ITP seems more suited to start-ups that are in between early stage ones and the more mature firms,” he added.

    Take Paytm, for instance. The mobile commerce company was valued at roughly $2.3 billion at its most recent round of funding in January. Vijay Shekhar Sharma, founder, told BusinessLine: “SEBI has offered few necessary changes to the IPO process but these are not enough for India’s fast-growing technology companies. This is a bit of fast tracking, but base norms don’t change much. For tech companies still international stock markets remain more attractive.”

    Good for early start-ups
    Shiju Radhakrishnan, and CEO,, is slightly more optimistic. “The revised norms by SEBI might directly help early stage start-ups such as iTraveller raise funds through the IPO route in the next three to four years once the norms have matured.”

    On the other end of the ITP as well, with investors likely to buy into the IPO, the mood isn’t as positive. For them, the business models of technology start-ups, none of which is as yet profitable, are suspect.

    Rajeev Thakkar, Director, PPFAS Mutual Fund, said, “E-commerce can capture the market as long as they offer discounts. But in the long run, bulk distribution is more efficient than delivering each order to every single person. For us (at PPFAS), our holding in Google is an indirect bet on e-commerce in the whole world but I’m reasonably sure I wouldn’t buy a Flipkart.”

    The original article could be seen here.

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