Why many top companies have not yet tapped capital market in India?

Why Many Top Companies Have Not Tapped Capital Market Why many top companies have not yet tapped capital market in India?

20 years back, the most talked about unlisted companies were the likes of Godrej and TCS. Even Wipro had remained unlisted for a long time. Even today, there is a lot list of companies that are not yet listed and are yet to tap the capital markets. Here is a partial list of famous companies that are yet to hit the capital markets.

  • Bennett Coleman & co. Ltd (Times Group)
  • PARLE Products
  • AMUL India
  • Malabar Gold
  • Patanjali Ayurveda
  • Flipkart
  • One97 communications Ltd (Paytm)
  • Shapoorji Pallonji
  • Catholic Syrian Bank Ltd

Have you ever wondered why these large companies are still away from the capital markets? There could be various reasons for the same. Here are a few of them.

Unwillingness to cede control

A public issue and listing means opening up your books to greater scrutiny and sharing control with more shareholders. It comes with a lot of hassles of listing. Some of the companies like the Times Group, PARLE Products, Shapoorji Group and Catholic Syrian Bank have been unwilling to let go control. Also in these cases, the cash flows have been so robust that they never felt the need to go into the public issue market and raise funds.

An issue of complex ownership structures

Another issue has been the ownership structure of some of the organizations listed above. Many of them have not been structured in the traditional structures like corporate structures and hence the transition may be difficult for them. Companies like AMUL are still structured like a cooperative of farmers and the interests are so large that they cannot put the shareholders on the pyramid. Same is the case with companies like Himalaya and Patanjali Ayurveda where the ownership is a complex web of traditional structures and so the transition is likely to be a lot more complicated.

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Worry of becoming acquisition targets

One of the concerns for many traditional businesses is becoming easy targets for acquisitions, especially when another company with deeper pockets is able to bankroll the acquisition. We saw that in the case of L&T bankrolling the acquisition of Mindtree and that has a lot of first generation companies worried. Companies like Catholic & Syrian Bank and Malabar Gold have a different problem. Their businesses get low valuations and hence they are bound to have a situation where the market cap may be less than the intrinsic value of the company. This is a concern for specific business models.

They can get the money from private equity

Companies in the emerging Ecommerce and Fintech space have a problem of plenty. Funds are available dime a dozen from private equity players and from VCs. Of course, this comes at the cost of control but that is a different issue altogether. The likes of Flipkart and Paytm have been able to get funds from the biggest names like Warren Buffet and Wal-Mart. As of now, they may not see much of value addition in going for an India listing.

Many of these companies may eventually see value in an IPO in India because an IPO gives you currency for bigger expansion plans. But that may still be some time away.

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