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    No-promoter IPO: Zomato may only be 10th in 15 years; may guide more Indian unicorns

    No-promoter IPO: Zomato may only be 10th in 15 years; may guide more Indian unicorns

    No-promoter IPO: Zomato may only be 10th in 15 years; may guide more Indian unicorns
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    By Mugdha Variyar   IST (Published)

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    Zomato may become a pioneer in many ways, as it sets out to be the first tech unicorn to go for an IPO in India, and is also likely to pave the way for more no-promoter listings from the unicorn club. 

    Zomato may become a pioneer in many ways, as it sets out to be the first tech unicorn to go for an IPO in India, and is also likely to pave the way for more no-promoter listings from the unicorn club.
    Zomato's draft red herring prospectus filed on Wednesday shows that the company has no promoter and is a professionally managed company.
    According to Prime Database, since 2005, only nine companies that have IPO-ed have been professionally managed, and of these, seven went public in the last five years, including Tejas Networks, Ujjivan Financial Services, and RBL Bank. This will make Zomato only the tenth company in over 15 years to take this route, as and when SEBI gives its approval.
    "Historically, in India, most listed companies are promoter-controlled. With startups, promoters are diluting their equity over multiple rounds which results in a broad pool of shareholders, hence they can't meet the minimum promoter requirement route," said Pranav Haldea, managing director, Prime Database.
    According to Zomato's shareholding pattern, CEO Deepinder Goyal holds 5.51 percent stake in the company.
    The DRHP says that none of the company's other directors apart from Goyal have "any interest in the promotion and formation of our Company other than in the ordinary course of business."
    Currently in India, the regular listing attracts qualifiers like profitability, net fixed assets and minimum promoter requirement of 20 percent, and even the QIB route listing with 75 percent QIBs for companies that do not have profitability requires a minimum promoter requirement of 20 percent.
    Given that most tech unicorns are still loss-making, and much like Zomato, will continue to be over the next few years, the no-promoter listing may be the most likely route, industry experts say.
    The main attraction in the no-promoter route is that shareholders do not have to lock in 20 percent capital for three years, said a lawyer that works with companies on IPOs, requesting anonymity.
    "This could be another reason why many startups could look at such a listing. Zomato could be the pioneer for no-promoter listings," he said.
    ​Indiatech.org, a body of leading tech unicorns in the country, has been in discussions with SEBI on easing listing norms for startups.
    "For startups desirous of listing with an identified promoter, there is a minimum promoter requirement of 20 percent, which Indiatech is engaged with SEBI to ease," said Rameesh Kailasam, president of Indiatech.org.
    "With no-promoter listings, there is no requirement of minimum promoter’s contribution or a lock-in period of three years pursuant to the Offer. Many startups looking to list in India would use this route to list. More IPOs and listings by Indian startups will significantly boost the overall investor confidence and we may see floodgates of investments into Indian startups," he added.
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