The listing dilemma

When deciding between listing in India and the US, founders should prioritise long-term considerations over listing price

In the past few weeks, I have been asked by many private companies about where they should list? discussions, it is clear that we are going to see a stream of new listings from the venture capital/private equity ecosystem. This move towards listings is driven by the robustness of markets in both India and the US, the pressure from fund limited partners for distributions, and the fact that many companies are left with only 9-12 months of cash runway.

The dilemma is clear: International investment banks want a global listing as it showcases their strengths; venture capital firms are trying to maximise the initial listing price; and many of these private companies are domiciled overseas, so tax consequences of a local-listing are not trivial. Therefore, listing is an important decision, impacting long-term value creation.

How should one think about it? A simple framework is that by listing overseas, you eliminate the domestic investor base and many emerging market (EM) investors. If you list locally, you will exclude many global investors, who are not set up to trade local equities. Which investor base is more core and important to you and can appreciate your type of business? Both pools of capital are sufficient to support any listing. Another consideration is the ability of different listing jurisdictions to value different types of businesses. Is it true that US markets are more appreciative of high-growth unprofitable businesses? I often hear that Indian public markets would have never funded a disruptor like Netflix or Tesla, years of losses and negative cash flows. However, are you such a disruptor? To me, if your business is very local, either in terms of the customer base or regulatory environment, then the choice is clear. You must list in India.

If the potential investor has to have an understanding of India and the local business environment to truly understand your business and its potential, it is best to list at home.