Startups

IPO frenzy benefitting startup ecosystem

Read more at www.thehansindia.com

Corporate governance is the cornerstone of sustainable businesses. Sound corporate governance policies not only ensure longevity of enterprises, it also creates a healthy business ecosystem in the society. In this perspective, the ongoing IPO (initial public offering) frenzy seen among the internet-based startups brings good news for the overall startup ecosystem.

As we have seen on many instances, startups pay hefty pay packages to promoters and top employees, which is not seen in traditional businesses. Similarly, the work culture of startups usually doesn’t bode well for work life balance.

As unicorns raise millions of dollars from private equity and venture capital funds, the focus on aggressive growth usually leads to bypassing many established practices on employee wellbeing. Also, the role of independent directors is fairly low in many new age startups. So, lack of established process in startups are glaring, leading to sudden exit of top employees or founders on many instances.

Therefore, public listing of these new age startups is a welcome change with regard to corporate governance practices. Firstly, the process of listing shares on exchanges is quite exhaustive.

Companies have to furnish a lot of data apart from complying with many regulations to get their shares listed on exchanges. The board structure and holding of board meetings, annual general meeting, formation of compensation committee, appointment of independent directors and their roles, internal audit structure and many more such compliance matters are well defined under the Companies Act and the startups listing on the bourses have to abide by these norms.

Moreover, investors’ watch each movement of the company with a hawkish eye. So, transparency and accountability in case of listed entities lead to formation of established practices in startups.

Given the importance of the startup ecosystem in India, it is critical that these new age companies prosper to favour greater wealth creation.

Currently, India is home to the third-largest startup ecosystem in the world. The Economic Survey of India estimates that the country has produced 38 unicorns (companies with more than one billion dollar valuation) by the end of 2020.

Despite being a pandemic year, 12 new unicorns were added last year. A Nasscom-EY startup report forecasts that India is on its way to producing 50 unicorns by the end of this year. In 2021 so far, startups have raised around $20 billion.

Therefore, the scope of creating employment by the startup ecosystem is huge. When companies operating in the old economy are slowing down, leading to job losses and lesser job creation potential, startups are increasingly seen as the saviour for pushing employment-led growth of the Indian economy.

Against this backdrop, the longevity of startups is a must to push economic growth that has been badly hit by the pandemic. And public listing of shares is a sure way of achieving this objective.

After the stellar debut of Zomato, more than dozen firms including Paytm, Nykaa, MobiKwik, Policybazaar and many more have filed draft prospectus with the market regulator for their upcoming IPOs. May this tribe grow in future for attaining the growth objectives of the Indian economy.

Read more at www.thehansindia.com

Show More

Related Articles

Back to top button