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BW Businessworld

Nasdaq Nostalgia

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IT may be the moment of truth for India’s Internet entrepreneurs as Homeshop18, the online retail arm of the Network18 group, gears up to file for listing on the US stock exchange, Nasdaq, by the year end. How well the listing goes will indicate whether the Indian online industry can bank on the stock markets to raise resources in today’s economic environment. 
This will be the first IPO by an Indian online firm since MakeMyTrip (MMT) raised $100 million in August 2010.
Early-stage Net firms need to be supported by cash infusion through a period of depleting capital, mounting losses and long gestation periods till they hit volumes. IT-friendly Nasdaq is seen as a safe bet for such firms. “US investors understand Internet and online retailing, they are ready to fund companies even if they are losing money,” says Hitesh Oberoi, chairman of the Internet and Mobile Association of India. 
However, not everyone’s had a great run. Even Facebook is trading at a 48 per cent discount to its sale price. “Though, it can’t be denied that the IPOs worked from a corporate perspective. Pricing and scalability is a different issue,” says Avinash Gupta, national leader, financial advisory at Deloitte India. While it is difficult for Indian firms, who are yet to turn profitable, to list in India, investors and norms in the West are more flexible. Even MMT had never booked an annual operating profit before its Nasdaq listing. Homeshop18 expects to close this fiscal with revenues of Rs 160 crore, and is believed to have broken even this September. Queries sent to the firm remained unanswered. 
But, Gupta says, “Sentiment and timing is important for any IPO. Clearly there’s a positive momentum for IPOs that have a great story.”  

(This story was published in Businessworld Issue Dated 22-10-2012)