Young entrepreneurs, who enjoy a strange love-hate relationship with VC investors because of their intrusive behaviour, now have an alternative, startup IPO.
Desi startup Alphalogic Techsys became the first enterprise to float India’s first startup IPO, which would allow it to raise growth capital from a group of investors instead of select VCs.
Markets regulator Sebi in February paved the way for a separate platform for startups to provide young companies easier access to capital and a way to bring in a new class of investors.
The Pune-based boutique software consulting firm has fixed the issue price at Rs 84 per share and the minimum units one needs to buy is 1,600 shares, requiring a minimum investment of Rs 1,34,400. Overall, 7.36 lakh shares are on the block, worth Rs 6.18 crore.
At the offer price, the scrip is available at 7.82 times FY19 earnings per share.
This is India’s first startup issue.
Managing Director Anshu Goel said VC investors demand too much of control and interference in the functioning of the business. “While seed-stage funding is for very early age startups when it is only an idea, once the company stabilises and matures, IPO is something that looks really beneficial for a startup,” says he. “This could be one of the best ways to raise money without losing control.”
Its bigger listed peers included Xelpmoc Design, which had a tepid listing in February this year. Info Beans Technologies and Industry Composite are two other listed entities that the company calls its peers.
The pre-issue net worth of the IT company stood at Rs 2.22 crore as per restated balance sheet for FY19. The book value as per the restated balance sheet stood at Rs 162.95 for the year. The company’s net profit more than doubled in FY19, growing at a compounded annual growth rate of 40 per cent in last four years.
Asked what led to a big jump in FY19 profit and sales data, Goel said: “When our customer starts a project with us, it requires a substantial amount of money to shell out in the beginning. Till product development is done, we keep receiving money.”
Goel said his company reduced debt from internal accruals. Total debt stood at Rs 1.21 crore in FY19.
The company has interests across segments such as mobile app development, web application development, business intelligence and data analytics.
It has over 100 clients and each client has multiple technical verticals. The list included one of the world’s largest shipping company based in Denmark, a healthcare giant from the US and firms such as 10XHealth, Venture Harbour, AP Moller Maersk, Artfire.com, Forbes Marshall, American Homeowner Preservation, Haplo, Cloud lending.Inc, Access Truth and Fair health, among others.
Goel said the company plans to expand into new clientele and enlarge the team in order to leverage various organic and inorganic opportunities. The company lists West Asia, North Africa, Europe and Latin America as target geographies.
Sebi has first allowed startups to list through the institutional trading platform way back in 2015. But this was a non-starter as criteria fixed for the same, such as furnishing of financials of three years and reporting of profit or a positive net worth were not possible for firms on a growth track. Sebi changed these rules in October 2018.
Companies that are primarily into technology, IP, data analytics, biotechnology or nanotechnology where at least 25 per cent pre-issue capital is held by QIBs or accredited investors for two years are eligible for launching such IPOs to raise capital in the Series B upward stage. The norms also require a six-month lock-in for pre-issue shareholders, 25 per cent minimum public float, minimum application size of at least Rs 2 lakh and at least 50 minimum allotments.
