BSE Ltd, Asia’s oldest stock exchange, has attracted India’s top companies but has failed to woo startups.
Only two companies —Alphalogic Techsys and Transpact Enterprises—are listed on the exchange’s startups platform, nine months after the platform was launched. This has prompted BSE to step up efforts to include more companies.
Several meetings have been held with startup founders and investors, said Ajay Thakur, head of BSE SME and Startups.
Memorandums of understanding have been signed with HDFC Bank and the governments of Uttar Pradesh, Haryana and West Bengal to create awareness about the platform and the benefits of listing on it, Thakur added.
“A few companies will soon sign on to the startups platform," he said, adding that the startups index will be created after 15-20 companies get listed.
“The Startups platform provides an opportunity for investors to make an entry into a company, and they also have a ready-made platform to exit. Depending on how well the stock performs, startups can after two years, migrate to the main board of the stock exchange," Thakur said.
For instance, the Society for Innovation and Entrepreneurship, IIT Bombay-incubated medtech startup Transpact Enterprises, which designs and manufactures therapeutic devices for differently-abled people, believes the listing has been worthwhile. Aslam Khan, founder and chief mentor of Transpact, said the company was able to raise around ₹1.3 crore from their recent IPO. Transpact, which was founded in 2013, had earlier raised an angel round and a seed funding of ₹25 lakh from IIT-Bombay.
Further, he added, listed firms have to follow compliance norms. “It brings transparency in the business operation and good corporate governance that enhances the credibility of the firm. This gives customers and investors a lot of confidence," he said.
One of the advantages of the BSE Startups platform is that even startups that are not yet profitable, can list on it and launch their initial public offerings (IPOs), he added.
Not all startup founders agree. Many said that early- and growth-stage companies may not list in India for several years.
This could be due to low profitability, stricter compliance norms for public limited companies, and access to venture capital (VC) and private equity (PE) money.
Nithin Kamath, co-founder and chief executive of online stock-trading platform Zerodha, pointed out that being a public limited company is tougher in terms of compliance norms, than being a private limited company.
“Most startups think about it a lot before they convert themselves to a listed company. Most compliance is not necessarily bad, but when you are an early-stage or a growth-stage startup, these kind of compliances can potentially slow you down. And, this is the norm across the world, not just in India. When you are listing on an exchange, the compliances go up," he added.
Startups also find it easier to raise capital from venture capital and private equity firms, rather than from the public. “We are so flush with PE, VC money, that it is easier to go there and operationally, you aren’t slowed down by compliances," he added.