For many SME promoters, launching an IPO is both thrilling and a little nerve-wracking. You've built your business from the ground up, navigating through challenges and competition. Now, you're on the brink of opening your company to the public. But one question quietly persists: Is this really the right step forward?
In this chapter, we delve into that question and explore the hidden concerns that accompany it, equipping you to make a well-informed decision.
Will my company's compliance requirements significantly increase after IPO?
Absolutely, going public does bring more compliance responsibilities, but it's manageable with the right approach.
- You'll face increased reporting obligations and audits.
- Every business move will need thorough documentation and justification.
- Governance will need to become more structured and transparent.
- Staying updated with SEBI and exchange regulations is crucial, requiring analysis and timely implementation.
However, if your company is already running efficiently, this transition is more of a natural progression than a burden. With the right systems and expert help, compliance can be part of your growth journey, building long-term trust with investors.
Enhanced compliance is beneficial as it helps small companies evolve into larger, more successful entities, supporting sustainable growth.
Will I still be in control of my business after IPO?
Yes, you'll retain control, but with more eyes on your decisions.
As the promoter, you're still the key decision-maker, steering the business, making critical calls, and driving execution. Public investors typically do not interfere with daily operations, especially in SMEs.
What changes is the level of scrutiny. Major decisions need clear rationale and must be communicated publicly. Investors, analysts, and media may question your choices or timing. Large shareholders influence not through direct orders, but through their expectations and actions.
While you maintain control, you'll operate under greater visibility. This often leads to better decision-making and a stronger, more disciplined company.
Will I get the right valuation from IPO?
An IPO aids in price discovery, as the market determines your company's worth. However:
- Overpricing can result in poor market performance and long-term repercussions.
- Underpricing may leave potential capital untapped.
Smart promoters find a balance: ensuring investors see potential gains while securing enough to fuel the company's growth phase.
Will investors understand my business?
This largely depends on how well you communicate your business during and after the IPO.
- Present your business model clearly and confidently.
- Investors need simplicity, not complexity, explain revenue streams, growth drivers, and future prospects.
- Avoid overpromising; focus on achievable goals.
Remember, IPO marketing is about setting realistic expectations, not spinning tales.
What do investors typically look for after a company goes public?
After listing, investors are not just buying into a vision, they're investing in tangible results.
- They expect business growth, improved margins, and strategic execution.
- Meeting or exceeding expectations earns their support; falling short may lead to public criticism.
- Quality investors focus on the long term but require consistent performance.
Investors are there to generate wealth, not just cheer from the sidelines. Your ability to manage performance and expectations will shape your market reputation.
Will I lose my risk appetite after IPO?
Many promoters experience this shift, and it's a natural progression.
- You'll likely become more cautious as each decision is under scrutiny.
- High-risk ventures or impulsive expansions become harder to justify.
- While decisions may slow down, they become more deliberate and thought-out.
Ambition remains, but there's an added layer of responsibility.
What if things don't go well after IPO?
Market volatility means even strong companies can face post-listing challenges due to timing or sentiment.
- A weak start isn't the end, it's just the beginning.
- Consistency over the next few quarters is what truly matters.
- Trust is built over the long term, not through immediate success.
You can't control market reactions, but you can control your company's performance, which should remain the focus.
Can I still sell my stake later?
Yes, you can sell your stake anytime, as long as you adhere to regulations. Consult your IPO advisor for guidance.
- Selling shares post-listing is easier if your company performs well; otherwise, finding buyers at a favorable valuation can be tough.
- Liquidity improves post-listing but depends on strong investor interest.
- Underperformance can make it difficult even for promoters to sell shares.
Focus not just on the IPO but on building a thriving company beyond the listing.
Is this the only way to grow?
Definitely not. Explore ‘Ways to raise funds for business’ for alternatives or contact us for guidance.
- An IPO is one of many options for growth.
- If your systems, culture, or strategy aren't ready, it may be wise to wait.
- Private capital, internal accruals, or strategic partnerships can support growth until you are ready for an IPO.
An IPO isn't a shortcut, it's a milestone that requires preparation.
What do I truly gain from my company's IPO?
If executed well, going public offers several benefits:
- Creates wealth for founders and team members
- Enhances brand recognition and customer trust
- Boosts credibility with lenders, partners, and regulators
- Easier access to capital, not just during the IPO, but later via follow-on offers, Qualified Institutional Placements, and more.
- Provides liquidity for gradual exits or expansion
- Opens doors to global capital in future funding rounds
- Strengthens governance and structure, supporting sustainable growth
- Attracts high-quality independent directors who add strategic value
An IPO can elevate your company's standing from a growing business to a significant player in the market.
What should I keep in mind for my company's IPO?
Here's a checklist to consider before going public:
- Are your financials transparent and compliant?
- Is your business model proven and sustainable?
- Do you have at least two years of solid performance?
- Is your leadership ready for public scrutiny?
- Do you have a clear strategy for the raised funds?
- Are your internal systems robust enough for public company compliance?
- Can you commit to ongoing transparency and investor engagement?
If you're nodding to most of these, you're closer to being ready than you think.
Key Takeaways
Every promoter harbors doubts before going public, and that's perfectly normal. What counts is addressing these doubts honestly and preparing thoroughly.
Going public isn't about prestige; it's about readiness. When you’re ready, operationally, emotionally, and strategically, an IPO becomes a powerful growth milestone. It's not just a financial event but a transformative journey.
Note: We offer IPO consulting services, including meetings with promoters who have recently listed their companies in your sector. Their real-world insights will help you understand the process better and make informed decisions.