Startup founders, VCs write to PM Modi on direct overseas listing of Indian companies

New Delhi | Bengaluru: The heads of 22 top startups and venture capital firms have jointly written to Prime Minister Narendra Modi urging India to allow homegrown companies to directly list abroad.

The group, which includes the Who’s Who of India’s startup ecosystem, said allowing companies to list overseas would be the “single most significant, big-bang reform”, adding it would “instantly pave the way for many Indian companies to be on the global map.”

The letter was sent earlier this week, with copies marked to finance minister Nirmala Sitharaman, commerce minister Piyush Goyal and IT minister Ashwini Vaishnaw.

ET has reviewed a copy of the letter.

The signatories to the letter include Kunal Shah of Cred; Byju Raveendran of Byju’s; Sriharsha Majety of Swiggy; Rajan Anandan, managing director and partner at Sequoia Capital India; Scott Shleifer, partner at Tiger Global Management, and Prashanth Prakash, partner at Accel.

Gaurav Munjal of Unacademy; Amit Jain of CarDekho; Abhiraj Singh Bhal of Urban Company (formerly Urbanclap); Jaydeep Barman of Rebel Foods; Amrit Acharya of Zetwerk; Asish Mohapatra of OfBusiness; Souvik Sengupta of Infra.Market, and Ashneer Grover of BharatPe, are the other signatories.

Navroz D Udwadia, cofounder and partner at Falcon Edge Capital, and Ravi Adusumalli, founder and managing partner of Elevation Capital (formerly SAIF Partners), are among those from top tech investment funds who have lent their names to the request.

According to the letter, while several companies are looking to list in India (Zomato being a recent success story and trendsetter), startups need access to international capital to level the playing field with foreign technology giants and be globally competitive.

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It said the total market capitalization of all the companies listed in India is about $3 trillion, while the comparable number for the United States is $50 trillion.

“We have reached out to PMO seeking clarity over direct listing of startups overseas. This could bring more capital in India and help in brand building of Indian startups in markets like the US. Many startups have ‘flipped’ structures to set up companies in Singapore so they could list abroad. They won’t have to do it if this is allowed,” one of the founders told ET, requesting anonymity.

Jishnu Bhattacharjee, MD of Nexus Venture Partners; Neil Mehta, managing partner, Greenoaks; Niren Shah, MD, Norwest Venture Capital; Bejul Somaia, partner, Lightspeed India Partners, and Vikram Vaidyanathan, MD, Matrix Partners India, are also part of the signatories.

The letter said international stock exchange listings will help ‘raise the profile of Indian startups, helping them compete on a global stage with startups from other countries.’

So far this year, 19 new unicorns (or companies valued at $1 billion or more) have emerged from India

“Given this trend of fast-paced growth, many such mature companies are now keen to tap stock markets to raise further capital as it will allow them to fuel their domestic and international expansion, generate employment and make India more efficient and competitive,” the letter said.

India must allow its startups to access global capital by listing on international bourses if it wants to produce multinational tech giants, it added.

The current inability of unlisted companies to tap international markets for raising capital is an impediment to growth and most Indian startups do not have a level-playing field with their foreign counterparts. It also leads to “migration of startups outside India, or flipping”, the note added.

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The letter comes at a time when half a dozen Indian startups have filed their draft prospectuses to go public. Food delivery app Zomato’s blockbuster listing last month has set the stage for other startups to accelerate their IPO plans.

“Valuation of sectors like SaaS, InsureTech would be more abroad. What might work for a consumer company here might be different for another sector-focused startup,” the founder of a startup said.

In September 2020, the government showed its intent to allow direct overseas listing of Indian companies by amending the Companies Act, 2013.

In February this year, Indian companies listed overseas were also exempted from several obligations applicable to domestically listed companies.

“We are writing with a request to kindly move forward with this unfinished reform agenda and expedite the steps required for turning overseas direct listing into a reality,” the letter said.

“We are seeking more clarity and get this expedited,” another founder told ET.

ET reported in June that Urban Company was planning an IPO in the next 24 months after raising $225 million at a post-money valuation of $2 billion.

“We are looking to go public in the next 18-24 months, work for which has already started. Earlier, we were aiming for 2023-2024, but the pandemic has accelerated our ambitions to go public,” Bhal, who co-founded the startup in 2014 with Varun Khaitan and Raghav Chandra, had told ET.

Unacademy’s Munjal also told ET last week that he was considering an IPO as a serious option after Zomato’s stellar debut. It is still two-three years away for Unacademy and the company has yet to take a call on a domestic or foreign listing.

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Concerns whether an international listing would dampen the development of the domestic capital market are unfounded, the letter said.

As foreign investors get more familiar with investing in Indian companies listed on foreign stock exchanges, they will also be encouraged to drive more investments to Indian startups.

Even if international listing is permitted, many companies will continue to prefer listing on domestic exchanges because of home brand recognition, ease of investor relations, lower litigation risk, lower listing and ongoing compliance costs, it said.

“However, the option to list overseas will provide a new avenue for certain categories of tech companies that may benefit from an international listing,” the letter pointed out.

Many of the world’s biggest tech companies are listed on foreign exchanges, including in the US and Singapore. “This provides a broad frame of reference to value other tech companies. There is also more specialization amongst investors due to which they are able to place a higher valuation on these companies,” it said.


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