Startups looking to raise capital from venture capital (VC) and private equity (PE) investors to fuel their growth may now find listing as an attractive alternative route to secure capital. BSE on Monday announced signing a memorandum of understanding (MoU) with IIT Alumni Council to encourage listing culture among startups and develop a ‘high investor depth’ startups platform. The council, which is a global body of IIT alumni, students and faculty across 23 IITs, will work towards bringing in transparency, governance improvement, market discovery of share price, providing liquidity to PE investors and enable retail participation in its alliance with BSE.
“These people (IIT alumni) have got a great network of investors and mentors etc. and themselves have been mentoring a lot of startups. We want to bring more startups on BSE Startups platform and support them in listing as they don’t have the financial bandwidth to understand the process of listing and fundraising etc. That’s why IIT Alumni Council has been working a lot in this space,” Ajay Thakur, Head, BSE SME and Startups told Financial Express Online.
BSE Startups platform was launched in December 2018 and has five startups listed so far with a market cap of Rs 82.71 crore till date. The five enterprises have raised Rs 19 crore. “To enhance the efficiency of the listing process and also to increase access to a pool of investors for startups, IIT Alumni Council proposes to use AI and other automation tools to reduce time, cost and efforts involved in the listing process,” said Ravi Sharma, President and Chief Volunteer, IIT Alumni Council. The council will also encourage its associated and volunteer-managed funds to underwrite, act as anchor investors as well as market makers for such listings.
The listings on BSE Startups platform took off in August 2019 and by January 2020 it had four startups listed. There’s one more prospectus filed by a startup while there are additional around five prospectuses on which merchant bankers are working, said Thakur on the number of listings on the platform. “This was the same trend we saw for SME platform that slowly started picking up in the number of listings after the first few months of launch. You will see more startup listings on the platform ahead. Initially, startups may not be able to raise capital as much as they would get from a VC-PE investor but slowly as the valuation will start building up, they may find a lot of investors coming,” he added.
The tie-up will jointly work to help reduce listing time, complexity and cost for SMEs and startups by automating and standardising the documentation processes. For this, category I merchant banks will be empanelled, BSE said. The five startups currently listed on Startups platform are Nirmitee Robotics India, Tranway Technologies, Alphalogic Techsys, Transpact Enterprises, and Valencia Nutrition.