In 2010, a decade after it was founded, online travel portal MakeMyTrip (MMT) was ready to get listed on the stock exchanges. The only problem? The investors in MMT were split down the middle on where it should be listed: in India or the US. Two large investors along with a few independent directors were keen on a US listing, whereas another investor along with an independent director reckoned a local listing was best.
Cofounder Deep Kalra was torn. To make a decision, he decided to look beyond MMT, to at least six of India Inc’s best minds, including Ajit Balakrishnan, founder of digital content firm Rediff.com — which listed on Nasdaq in 2000 — and InfosysBSE -0.04 % director TV Mohandas Pai. Based on their inputs, Kalra took the call to list on the American exchange. “We wanted to raise $80 million in 2010, and we ended up collecting 15x,” recalls Kalra.
In the seven years since, only two Indian companies — Azure Power and travel portal Yatra in 2016 — have gone on to list on the American exchange. But as valuations come under pressure and raising further rounds of funding becomes increasingly difficult, a listing may be one of the very few options for Indian tech and digital firms. And where better than the exchange that’s home to tech and internet bellwethers like Microsoft, Intel, Cisco and Amazon?
Newspapers have been reporting since mid-2015 about etailer Flipkart readying for an IPO on Nasdaq. Last month, Business Standard reported that the decade-old ecommerce firm had hired top auditing firms to begin the process of filing for an IPO on the American bourse. Flipkart did not respond to queries from ET Magazine on a proposed listing.
Flipkart may not be the only internet firm eyeing a US listing. Another ecommerce unicornBSE 0.00 % ShopClues says it is planning to make its debut on the Nasdaq by the end of the year; online insurance platform PolicyBazaar is exploring a listing on the US stock exchange; and GirnarSoft, which runs auto portals CarDekho, Gaadi and Zig-Wheels, may also take the plunge.
So, are Indian startups finally ready for Nasdaq? Kalra reckons so. The ecosystem is maturing, even as another round of high-value funding looks tough. Entrepreneurs, contends Kalra, would look to go to a place where they would get a depth of investors — who are more likely to buy into their story than back home, where appetite for the new economy is still low. What’s more, a listing is impossible for loss-making firms — which most online ventures are.
“Even if you are unprofitable but have a sustainable business model, you will find takers at Nasdaq who realise the value of scale,” adds Kalra.
For Yatra, the second online travel portal from India to get listed on Nasdaq through a reverse merger, it was a huge leap of faith. “We had the right internal structure, processes and systems in place to take this huge leap forward,” says CEO Dhruv Shringi. Yatra was founded in August 2006, had raised $222 million before it got listed and counts Reliance CapitalBSE 3.88 %, IDG Ventures India, Intel Capital and Norwest Venture Partners among its investors. The company with a network of some 61,000 hotels, 14,000 travel agents across 1,100 cities and gross bookings of $897 million in fiscal 2016 has a market value of some $347 million after listing. Nasdaq provides established valuation benchmarks for companies, which is something missing in India, says Shringi.
A key stopover
Venture capitalists contend that Nasdaq is better suited to, and more appreciative of, the nuances of a new tech company than the Indian stock exchanges. So, it can offer better price realisation. “Time seems ripe for getting listed,” says Shubhankar Bhattacharya, venture partner at Kae Capital.
The relative dearth of funding will not only enforce frugality and more prudent business decisions, but also lead to a rationalisation of valuations that will be closer to public market norms, he says.
Apart from injecting the muchneeded liquidity, a listing provides an avenue for investors to make an exit. Any company — whether unicorn or otherwise — that has had investors for 10 years…