Why India needs more tech companies going for IPO like IndiaMart

Over the years, private technology companies have believed staying private was more preferable than going public. For many reasons including more autonomy, less scrutiny, regulations, and liberty to stay loss-making entities.

But the narrative is fast changing as more tech-enabled firms are confidently choosing to go the Initial Public Offering (IPO) ways. In the first quarter of 2019 alone, Indian firms have raised close $940 million through 14 IPOs.

Adding one more to the list next Monday would be IndiaMart InterMesh, owner of Indiamart.com.

After mulling for years for the same and a few pivots one the way in its 23 years long journey, IndiaMart will launch its IPO after three days. Before delving deep into IndiaMart journey and its expectation from the IPO, lets first understand the term well- what is IPO and why companies go for it.

IPO is best described as a process where a private firm goes public by selling off its stocks in the general public. Any private firms can go public irrespective of its years of existence, size, and type of business.

Why?

For further growth of the company. IPO is a way through which a firm generates the capital needed to expand its business and create increased awareness about the company among people. It is also used as a means to provide an exit to early investors that helped the firm start off.

The IPO process is also critical for the country's economy as it helps create wealth and innovation. The cash out coming out of the process encourage and inspire many others to start the business. In nutshell, a healthy IPO has a direct impact on economic innovation of the country.

IndiaMart, which is one the largest online B2B marketplace, will also intend to replicate the gain on the same lines.

Dinesh Agarwal-led firm is looking to raise about Rs 475 crore through the IPO. The company has priced its shares in the range of Rs 970-973 apiece.

IndiaMart and its existing early investors including Intel Capital, Amadeus Capital Partners, and Quona Capital, who own about 24%, will sell about 4.88 million shares. Promoters Dinesh and Brijesh Kumar Agrawal will sell 14,30,109 shares through the issue.

The initial share sale for IndiaMart would be managed by ICICI Securities, Edelweiss Financial Services and Jefferies.

This will be the first IPO for the current government.

Launched in 1996, IndiaMart created an online B2B directory, along with websites building platforms for exporters and SMEs.

The company which was started as a listing platform has now the largest directory of business where, as claimed on its site, over 82 million buyers have access to 5.5 million suppliers for over 60 million products listed on the platform. It posted revenue of Rs 429 crore in 2017-18 with a profit of Rs 46 crore.

Till date, it has raised about $22 million in funding.

Will IndiaMart set tech IPO in motion in India in 2019?

As per industry analysts and data, India is still at an early stage but in last year numbers of Unicorns have grown manifold and in coming years the numbers will go up. The story of IndiaMart, which has stayed private for so many years before going to the public, will inspire many tech firms.

Last year over 10 startups turned Unicorns whereas more than 30 are Soonicorns.

There is no doubt that in coming years Indian tech firms will make a global wave. The country needs more public listed internet firms for robust internet ecosystem.

Whether it will be singular or plural in number, only time will tell.