Why Internet Companies and Startups are not ready to face the stock markets

It has been observed that the internet companies and startups in India are not too keen to be part of stock markets and are not open to the investors of the country. Since the year 2006, the country has witnessed a giant leap in the number of start-ups or the internet companies. This has made India as the 3rd largest startup hub in the whole world. But out of these, only five companies have listed themselves on the stock exchanges.

These five companies are Infibeam Incorporation which was set up in the year 2007 and is listed both on NSE and BSE, Intellect Design Arena which was set up in the year 2011 and is listed on both NSE and BSE, Koovs which was set up in 2010 and is listed on LSE, 7Seas Entertainment Ltd which was set up in the year 2005 and is listed on BSE, and lastly Yatra Online Inc which was set up in the year 2006 and is listed on NASDAQ.

The experts believe that though there have been many discussions happening on this topic lately, but the share market is not expecting any other listing by any other internet start-up in the near future. They say that there is no upcoming IPO as of now as most of the start-ups are not ready and they need some more time and preparation to come up with IPO.

Though in the current scenario, we have been witnessing a magical increase in the number of IPO’s. While as many as 7 silicon valley companies have gone public in the initial three months of this year, but only a handful companies like e-commerce Shopclues and online furniture company Pepperfry have declared their plans.

One of the prime reasons cited is the inconsistent finances. Recently both Flipkart and Snapdeal have recorded major losses. Though there have been many private investors and world’s biggest investors like IDG and DST who have invested in the Indian startups in past, but raising funds from IPO is quite a challenge. The investors do not invest unless they see soaring revenues and profitability.

Another reason is the lack of innovating new business models. Many new start-ups go with the same age-old model or their competitor’s business models. The retail investors demand for the creativity from the start-ups so that they have better chances of getting success in the long-term. Sometimes, the investors are also found to be hesitant in investing in a high-risk young business that are first or new in the market.

Also, what leads to the failure of a startup IPOs in India is the negative regulations. The startups are measured on the same parameters as the established firms having a completely different business models and growth paths. Though in the last few years, the government of India and also the stock market regulator Securities and Exchange Board of India (SEBI) have tried making the situation less cumbersome for the start-ups.

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