More venture capital or private equity-backed firms looking to float overseas

Online travel portal www.makemytrip.com’s successful debut on the Nasdaq stock exchange in August this year seems to have enthused other Indian companies to explore listing on foreign bourses.

Following suit in 2011 will be Yatra.com, another online travel portal, besides travel network company Via and remote consumer tech support firm iYogi.

Common to these three companies are two strands: each is backed by venture capital or private equity investors and each relies heavily on technology to offer its products and services.

Uday Challu, CEO and co-founder of Gurgaon-based iYogi told DNA 99% of venture-funded companies in the technology and product space with exponential growth would typically be looking to list overseas rather than in India.

This is because of the current listing norms in the country, said Challu. “It’s not that I am trying to figure out if I can choose from a few options because the option itself doesn’t exist. I say this because, fundamentally, no promoter group can end up having more than 26% post listing. And since the listing criterion in India is a minimum of 25% float, it basically means that for pre-listing, the promoter needs to have nothing less then 45%. Today, with employees, management and investors owning a significant part of the company, listing in India is just not possible. Having said that, being an Indian company, our heart and soul is very much here and if we had an option it certainly would be to list in India.”

The Gurgaon-based tech support firm has already raised close to $27.6 million in three tranches from Canaan, SVB Capital Partners, SAP Ventures and Draper Fisher Jurvetson (DFJ) since its inception in 2007. And in a recent Series D funding, it raised $30 million, adding Sequoia Capital to its list of investors.

According to its senior management, iYogi’s turnover has increased from under $3 million in 2007-08 to $7 million in 2008-09 and $19 million in 2009-10. It aims to close the fourth year — 2010-11 —at $65 million.

Happily for such companies, there are a host of options abroad, the most prominent one being Nasdaq. The other options include New York Stock Exchange, London Stock Exchange and bourses in Europe and Hong Kong.

The idea, experts feel, is to go to places where there is a huge technology, investor and analyst following. “Besides, good companies can tap capital in any market situation and if you are coming from an emerging country like India or China, then you definitely have a bouquet of markets to select from. However, in my opinion, Nasdaq is the most preferred spot for technology players,” said a senior official from a leading multi-stage private equity firm, requesting not to be identified.

Growing at a compounded annual growth rate of 65%, travel network company Via clocked a turnover of Rs1,400 crore last fiscal and aims to close this year at  Rs2,500 crore.

Backed by investors including NEA-IndoUS Ventures and Sequoia Capital, the promoters of Via are looking to list the company on the bourses in the coming calendar year. “We should be kick-starting the process soon and will be ready to go public sometime early next fiscal. In all, we would be targeting to raise anything between $300 million and $400 million,” said Vinay Gupta, co-founder and CEO, Via.

On the management’s decision to list overseas, Gupta said listing on the Nasdaq is a very attractive proposition for Indian companies that have used technology to their advantage. Nasdaq-listed companies get a very good following from investors, peer group companies, analysts and the like.

“Secondly, we are in a very good position to demonstrate good business performance numbers quarter on quarter, which makes the option even more attractive for us. While we haven’t taken a concrete decision on that as yet, there is no reason for us not to explore that option,” he said.  

In an earlier interaction with DNA, Sudheer Kumar Kuppam, managing director - India, Japan, ANZ and SE Asia, Intel Capital, had said Yatra would most probably look to go IPO sometime in the coming year.

“It’s kind of an obvious decision that Yatra.com will be looking to list overseas. No timeframe has been decided for the IPO though,” he said without divulging details about which international market will be explored for listing. Intel Cap is an investor in the company.

Kanwaljit Singh, managing director, Helion Advisors Pvt Ltd (HAPL) feels companies generally consider two or three broad categories for listing overseas. “Technology and product companies (like makemytrip.com) get some fairly strong global benchmarks and reference points by listing overseas. There is a better understanding and appreciation of the business of such companies in the developed economies. Besides, the width and the depth of the investors is much wider when you go to an international exchange and the company gets an opportunity to appeal to a larger set of investors which is clearly demonstrated from the makemytrip.com listing overseas,” he said.

Helion is an investor in Makemytrip.com, holding just about 10% in the company, and has not exited the company when it listed on Nasdaq earlier this year.