India Ahoy! India as a software IPO destination
Gokul Rajaram
Last week, as I chatted with the founder of a fast-growing software startup, he dropped a bombshell. “I want to move our parent domicile from the US to India.”
“Why?” I asked. “Your primary customers are in the US. You’re growing fast, with a clear line of sight to $100 million annualized revenue in three years or so. Why would you consider this?”
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Offering CollegeCourseWebsiteMITMIT Technology Leadership and InnovationVisitIndian School of BusinessProfessional Certificate in Product ManagementVisitIIT DelhiCertificate Programme in Data Science & Machine LearningVisitPat came the reply: “I don’t want to wait a decade or more to go public.”
His response was not entirely a surprise though. Indian stock markets are welcoming technology companies like never before. It’s not just that a software firm with $100 million in annual revenues, 20% Ebitda margins and 30% growth, can now go public in India. It would now be lionized, get a ton of press and analyst coverage, and likely a strong $1-2 billion valuation. This wouldn’t be possible in the US, where it would need to show revenues of at least $300 million to go for an IPO.
India has seen a flurry of tech IPOs in the last few years. Most of these have been ‘built for India’ consumer technology companies such as Paytm and Zomato. This has been fueled by three factors. First, Indian retail investors are hungry to invest in technology firms. Second, many Indian mutual funds have a mandate to invest a
