Do you see any negative impact of this IPO regulation for new age companies?

I wont call it negative impact, but there are 2 distinct risks. Firstly, such stringent regulations could actually dampen the IPO funnel. The issue here is that even prior to the legislation being announced, SEBI is insisting that new age companies get non-financial KPIs audited and explained. Parameters like eyeballs, page views, GMV, app downloads and customer footprint are easy to talk but tough to explain with a pen and a piece of paper.

SEBI wants these new age companies to give a detailed explanation on how all these parameters would eventually add up to and justify the price. This has goaded a number of digital new age IPOs to put off their issue plans for now. That is why you see so many new economy IPOs where the SEBI approval has been received but company unwilling to do the issue. The main problem is that it is tough to justify valuations of digital plays, just as it is hard to justify valuations of stocks like Bajaj Finance, Nestle and HUL.

The FMCG names may have attractive ROE and strong brands but digital plays disrupt the industry. Flipkart disrupted retailing, Byju’s disrupted learning and Paytm changed the payment ecosystem. How do you put a value to these finer aspects as they are based on the network effect. That is why today there is rethink on digital IPO plans. Too much regulation will export capital raising and drive these companies to the SPAC route; not a good idea.