Urging startups to go public once they have reached a certain scale, NSE on Monday said listing will provide them liquidity as also give exit options to private equity as well as venture capital funds which have invested in them. “Startups that have reached a certain size should think of listing soon as public listing gives access to a wider and deeper capital market for fund raising, with large investments by mutual funds and FPIs,” NSE Managing Director and CEO Vikram Limaye told PTI over phone ahead of the exchange’s tech conclave to be held here. “Besides, startups need to keep in mind that a public listing is one big source of exits,” he added.
He further said that liquidity and exit events are among the biggest challenges for startups. Traditionally in India, exits have mostly happened through acquisitions by private equity firms or larger corporations. The exchange believes that many startups will go public in the next 12-24 months as it is seeking to bridge the gap between the capital markets and the startups ecosystem.
NSE, which provides Emerge ITP platform for listing of the new age companies in technology, data analytics, biotechnology or nanotechnology, said that such companies will drive the economy growth in the coming years. Limaye said India has fully electronic stock exchanges with high liquidity and good settlement systems. Investing in stocks also offers a tax advantage. If an investor buys listed stock and holds it for over a year, the entire profit on sale is tax free.
“For founders and employees who have employee stock ownership plan (ESOPs) and have converted those to shares, listing gives them liquidity, gives them tax-free gains and liquid stock on which they can borrow. For existing investors, their return increases on listing as the gains on sale after holding listed stocks for a year will be tax free. “Listing also ensures that onerous conditions and differential rights in shareholders’ agreement are eliminated and all shareholders have equal rights,” he noted.
Besides, NSE Head Listing Ishita Vora said that the markets regulator is also willing to make conducive environment in order to encourage startup listing. National Stock Exchange (NSE) will hold a meet here tomorrow to talk to such entities as to whether they could access the markets. The meet is aimed at creating a conducive capital market ecosystem for the new economy and technology companies in the country, it said.