Snigdha Sengupta

This was the first listing by an Internet start-up on the domestic bourses and a thumping one at that—Info Edge raised Rs170 crore through the listing. The jinx had been broken—start-up Internet businesses could be built in India and taken public, the most preferred exit route for VCs anywhere in the world. Then, everything went quiet, again.

As it turns out, things have been quiet for a reason. In the past 12-18 months, a bunch of Internet and mobile value-added services (VAS) start-ups have been quietly preparing for the big party. Evidence: a series of what may be termed ‘pre-IPO’ deals concluded during this period. The qualification stems from the class of investors who have picked up stakes in what would conventionally be dubbed early-stage, venture businesses. Samples: Recently, US hedge fund Tiger Fund led a $15 million (Rs59.1 crore) investment round in travel portal ( India Pvt. Ltd).

So, it does seem that 2008 and going into 2009, will see a record number of Internet and mobile VAS start-up IPOs (initial public offering).

If all goes well, it will be a huge validation of India’s ability to scale start-up businesses, irrespective of the sector.

IPOs, more than trade sales (merger and acquisition deals), are a greater proof of a market’s viability, from a VCs’ point of view. The return potential is higher and liquidity concerns are addressed. India has lagged behind some of its Asian peers, notably China, in terms of IPO-led exits for VCs. It is only recently, after some kind of exit track record was established through trade sales that VCs have returned to this market. The Internet and mobile VAS segments remain the two highest funded by VCs in India. But, as such, investors now begin to apply investing principles to non-technology businesses as well, something that they have not done in their home markets, the handful of imminent listings next year bear a huge responsibility. All the best to them.

Snigdha Sengupta is Mint’s resident expert on private equity and venture capital.

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