Your Company’s IPO: Unlocking Value Or Selling Family Silver?

To IPO or not to IPO. The world of business seems vertically divided on this issue.

The difference is how do you, as an Indian entrepreneur, interpret the great Indian Karma theory in your business.  The theory of ‘one will get only that what is in one’s destiny’ or ‘one will earn only to the extent that one works’. Plenty among us think ‘whatever that I have earned is due to my hard work, my enterprise, my ingenuity, my acumen, etc. So, where is the scope for an IPO? Why should I share my silver that I have created for my family?’ Such thinking has been with us for generations. I must admit here that the thinking is changing rapidly, particularly among the young entrepreneurs.

Guess the real differentiator is an entrepreneur’s vision for the business. There are entrepreneurs who want to make a difference, those who believe that an opportunity is neither bound by geography nor by availability of money. There also are entrepreneurs who believe that they must share their growth with all stakeholders. And believe that they must grow faster and need to pull all plugs that potentially would slow their growth. Such entrepreneurs consider an IPO faster.

Consider this, your business is giving profits at 10% margins at a turnover of Rs. 400 and the company is also valued at Rs. 400.  You know that you can double it to Rs. 800 if you had Rs. 100 to invest right now. If the debt funding does not work, then the route left is IPO or selling some part of equity to institutional investors. This growth funding (Rs. 100) will not only ensure that you are able to double your turnover but will also unlock the value of your stake in your company. Surely, your earning will be more on enhanced turnover even when your share in the company is proportionately lesser when compared to a pre-IPO situation.

The myths surrounding capital markets and IPOs are many in India. Most of these emerging from our socio-cultural ethos and value system. ‘Family silver is for next generations’, ‘one should not do business with other people’s money’, ‘stock market is like a casino’, ‘once you have an IPO, then your business will go out of your control’, one must never display one’s worth (market capitalisation) in actual terms as nazar lag jaati hai.

Growing is all about the mindset. It is all about your belief in yourself. It is all about your vision for your business. To IPO or not. Your Company. Your call.