Indian stock exchange lures startups to go public

Till now only two startups have listed on BSE’s Startup exchange.

Source: Unsplash

Asia’s oldest stock exchange Bombay Stock Exchange (BSE) in its bid to lure startups to get listed on its startup-focused exchange is holding talks with several companies, and has signed memorandums of understanding with state governments to create awareness, according to media reports.

In its nine months of existence BSE’s startup specific listing platform has managed to get only two companies–Alphalogic Techsys and Transpact Enterprises–to list on its exchange.

In an interview with a local news site Mint, Ajay Thakur, the head of BSE SME and Startups, said several meetings have been held with startup founders and investors. The exchange has also signed memorandums of understanding with HDFC Bank and the governments of three Indian states including Uttar Pradesh, Haryana, and West Bengal to create awareness about the platform and the benefits of listing on the exchange.

“A few companies will soon sign on to the startups platform,” Thakur said. He said a separate index for startups will be created once 15 to 20 companies get listed on its exchange platform.

Most of the startups in India have not opted for initial public offering (IPO) yet, mainly because they are yet to turn profitable, and secondly because venture capital money is still abundantly available in the market. Thirdly, the amount of public scrutiny an IPO will lead to might encourage companies to remain private.

Ben Mathias, managing partner at Vertex Ventures said Indian entrepreneurs need to learn that if the line of revenue and loss keeps diverging then they have a problem. “The fundamental thing with any business is that you need to make a profit at some point. You can only keep raising investor money to a certain point and after that you have to start making money,” Mathias told KrAsia.

However, one of the advantages of the BSE Startups platform, Thakur said, is that even startups that are not yet profitable can list on it and launch their IPOs.

“The Startups platform [on BSE] provides an opportunity for investors to make an entry into a company, and they also have a ready-made platform to exit. Depending on how well the stock performs, after two years startups can migrate to the main board of the stock exchange,” Thakur said.