Will Paytm IPO boost startups?

Bengaluru FUNDING prospects for Indian startups is expected to increase in the coming years as more tech startups plan to list their companies on Indian bourses.

Experts said that as more private equity (PE) and venture capital (VC) players are able to exit their current investment through initial public offering (IPO), this will create favourable ecosystem for future funding.

Currently, One97 Communications, which owns and operates online payments firm Paytm, is planning to go public on Indian exchanges. The company, which is backed by China's Alibaba and Japan's SoftBank, aims to go public by November and is expected to file its Draft Red Herring Prospectus (DRHP) with markets regulator, the Securities and Exchange Board of India (Sebi), next month. Founded by Vijay Shekhar Sharma, Paytm is currently valued at $16 billion making it one of the most valued Indian startups.

"IPOs are the starting point of a new journey for Indian startup ecosystem. It is high time that the country should see more listing of domestic startups. Currently, India has around 50 unicorns and 20-30 per cent of these unicorns should go public," said Navin K Rungta, co-founder of eLagaan, a company that helps startups in various kinds of compliance matters.

"This will also bolster the whole startup ecosystem from funding perspective. Because, early investors will get an exit, and employees will start believing on the startups,"he added.

Earlier, gaming company Nazara Technologies got listed in March this year in India with its offer receiving whopping subscription of 176 times.

According to reports, a whole host of Indian startups such as Zomato, Delhivery, Nykaa are also headed for IPO.

Meanwhile, the market regulator Sebi has come up with a slew of norms facilitating the listing for startups. The regulator has reduced the period of holding of 25 per cent of pre-issue capital of the issuer company by eligible investors to one year from the current requirement of two years.

Sebi has allowed for startups that are headed for an IPO, to allocate up to 60 per cent of the issue size to any eligible investor with a lock-in of 30 days on such shares. Earlier,an issuer company wasn't allowed to make discretionary allotment.

The market regulator has also officially allowed differential voting rights for listed companies, a long-standing. With such rights, companies can allocate shares to promoters with higher voting rights.

Market experts also said that like the US market, these tech-powered new age companies are likely to be most valued firms in Indian exchanges in coming years.

Startups' IPO march

• IPOs are the starting point of a new journey for Indian startup ecosystem
• Country should see more listing of domestic startups
• India has around 50 unicorns and 20-30 per cent of these unicorns should go public soon
• According to reports, a whole host of startups such as Zomato, Delhivery, Nykaa are also headed for IPO