The IPO Story

The journey of three entrepreneurs from the ideation phase to scaling up and, eventually, a listing in the public markets.

Going public is a major move for an organisation and a sign of natural progression that comes with scaling up and market expansion. We talk to three entrepreneurs to understand how they took their company from the ideation phase to listing in the public markets, their professional routines one year before the IPO, the changes they had to make to the way they run their companies and what has changed post listing.

All entrepreneurs agree that there is no perfect timing for an IPO and it depends on the organisation’s positioning in the market place, economic conditions, thought process of the management team, and the overall goals of the business. Integrated business service provider, Quess Corp’s founder & Managing Director, Ajit Isaac, believes that a company is ready to go public, when it is ready to take responsibility and the company and management have a compelling investment thesis and are able to communicate the same to the broader market, effectively. For Dr. B. S. Ajai Kumar, founder ofHealthCare Global Enterprises (HCG Enterprises), the IPO was more a sign that his organisation is maturing and entering the next phase.

For most organisations, getting ready for an IPO also meant that new systems and processes had to be put in place. After all, for the first time, there is a whole lot of compliance-related deliverables and also the management has to get used to ‘making progress’, every single quarter. However, PN Vasudevan, the founder of Equitas Holdings, says that the company always adhered to systems and processes, as if it were a public limited company, keeping in mind the nature of its business. In the story, he talks about some of the most important aspects needed to deliver a good IPO, some unique challenges faced by Equitas, and how the company was changing its underlying business model right around the time of listing.

The three stories have been narrated to give you a perspective of what it takes for a venture to progress from idea to a successful IPO. Read on.

Equitas’ IPO Journey

Equitas Holdings raised Rs. 2,200 crore from the public in April this year. Incorporated as a company with a distributed ownership model, it was during this period when it changed its business model from that of an NBFC to that of a bank. The managing director and founder, P N Vasudevan, takes us through the various challenges and learnings he and his team had while planning for the company’s IPO.

P N Vasudevan, Managing Director, Equitas Holdings Limited.

For the founder of Equitas Holdings, P N Vasudevan, building a transparent company with high level of governance was always of utmost importance. And it was one of the main reasons why the company was ‘IPO ready’ right from the early days. When Equitas hit the bourses in April 2016, raising Rs. 2,200 crore, Vasudevan and team were working round the clock to ensure a successful listing, but one thing they didn’t have to do was to add systems and processes, for governance and compliance; That had been inculcated into the business process, right from day one.

Vasudevan says, “Usually, the merchant bankers study the organisation and make it IPO complaint which involves changes to the composition of the board, shareholder agreements and committee composition and eventually file the draft red herring prospectus (DRHP). In our case we had to do nothing at all.”  In fact, there is Clause 49 in the listing agreement which describes the governance standards for a company in India. “On 26 July 2007, when the first board meeting was held, we were already Clause 49 compliant,” says a proud Vasudevan.

When the company was started, some principals were laid down for Equitas. That it had to be: an organisation run by a set of professionals with no owners; majority independent board supervising the organisation and governance standard complaint.

Through this story, Vasudevan describes some key strategies adopted by Equitas during the public offering process and some lessons learnt during this phase.

Why the IPO?

The company, originally registered as an NBFC, received its license to convert into a small finance bank in October 2015. Once the banking license came through, there was a condition that the 93 per cent stake holding by foreign investors in the company had to become less than 49 per cent. “In India, domestic institutions are not allowed to invest in unlisted stocks and hence, we had to come out with an IPO if I had to get domestic investors interested in our company,” explains Vasudevan.

However, the management took the decision to apply for an IPO even before it got its banking license.  “Even if we had not got the license, we would have come out with an IPO as an NBFC,” says he.  The reason being the company was growing and so was its capital requirement and SEBI’s rule that Indian VCs cannot invest in unlisted NBFCs did not help much. The only other option Vasudevan had was to seek a new investor to raise money.  “In the private equity market,  upto a certain size of investment, you get a large number of investors who are ready to pump in US $10 million to US $20 million in companies. When your requirement increases, the number of potential investors reduces and they want certain strategic relationship with the company,” adds he. They are not interested in just attending board meetings, but want more participation in themanagement and decision-making of the company. But, since the philosophy of the organisation was distributed ownership (was willing to give away a maximum stake of 9.9 per cent to investors), Vasudevan found it hard to raise funds from large PEs.

When asked why Vasudevan didn’t want a promoter run business? He says, “I was the one who started the company and I didn’t have money to be the promoter. I knew that this company will never be mine. And, I wanted to ensure that all decision-making and operations were extremely professional. Even my continuance here is only because the board approves my performance.”

Challenges galore

Shareholding pattern: The fact that the company had no promoter was one of its biggest challenges. The company was high on governance standards and did not allow any shareholder to have more than 10 per cent stake, including Vasudevan. This, however, did prove to be a challenge at the time of the IPO as SEBI regulation for an initial public offering is such that whenever a company taps the capital market, the promoter should lock in 20 per cent of the post issue capital for a 3 year period. However, the company got an exception under one clause in the SEBI guideline. “In India, only L&T received it before us. A private company, L&T went public without a promoter and is still listed as a company without a promoter.”  Equitas is the second company in that category where SEBI gave an exemption to the promoter clause,due to its governance structure.

Business model swap:Equitas operated as an NBFC for 9 years and received its license to convert into a bank in October 2015. During the IPO, the company could not give any forward looking statements. “When we filed the DRHP, we mentioned that we have a license to convert into a bank in the next year or so. And beyond that we were not allowed to mention anything else,”states Vasudevan. This was a unique situation as people had a lot of questions on how the company raise deposits, brand and marketing strategies and its interest rates.  So while the company’s entire business model was undergoing a dramatic change, it could not communicate on how it will manage that change.  However, the company decided not to change the IPO timing and to counter this challenge, it put out a few strategic plans for the bank in its DRHP. “We were allowed to talk within that DRHP document. We highlighted our strengths as an NBFC, that is, large distribution, customer base and the fact that this particular customer base we serve, is not serviced by the mainstream banks even for liabilities,” says he.

Its large customer base is its future potential depositors and it gets an opportunity to leverage on this strength right from the start. It has 545 branches spread across 13 states in operation. The company highlighted its past execution capability in the microfinance and commercial vehicle finance sector.  “Many things we have done in MF is a benchmark globally for all MFIs,”  This apart, a survey done in 2013 suggests that there are 5.8 crore micro entrepreneurs who need loans betweenRs.50,000 and Rs.10 lakh, out of which only 4 per cent is serviced by banks. “That is highly underserved because no one wants to take on the high risk associated with it. We have been doing this for 5 years now and our NPA is 0.2 per cent,” states Vasudevan.Across all products, the company has shown capability to be innovative in product structure and delivered it to an underserved segment of society and managed it well.  The company highlighted these factors and allowed the prospective investorsto see the larger opportunity it had and its ability to deliver it.

Foreign shareholding: The company had 93 per cent foreign shareholding before the IPO. As per bank norms, when they gave us the ‘in principle’ license, one of the conditions was that the foreign holding has to come below 49 per cent.  “Due to this, when we did the IPO, we made it as an exclusive domestic issue. No foreign participation was allowed in the issue,” says he. Typically, when foreign investors come in, they take a long term view,if they believe that the company is capable of delivering long term. And in the domestic market, 50 per cent of the issue is reserved for institutions, 35 per cent for retail and 15 per cent for HNIs. “So every institution which is active in IPOs had to take the highest share (given the size of Rs. 2,200 crore) that they have ever taken in any other previous IPO to meet the 50 per cent criteria from institutions,” states he.

Life after the IPO

The company uses its platform to send two key messages:  One, the team highlights the real risk in the sector and communicates, in detail, the company’s capability to manage the risk.

Two, Equitas has a business model of integrating business with social activities. The company donates 5 per cent of its profit to its trust on a quarterly basis and 15 per cent of the microfinance net worth will be used for creating hospital and school infrastructure for supporting low income families.

Clearly, the company has come under the radar of a lot of people in the market, with several analysts tracking it on a regular basis. While the company used to put up its results on its website even before it went public, Vasudevan believes that it is being scrutinised more today, and aims to keep it as transparent as it has always been.

Going forward, the company is all set to capitalise on the market potential of the banking sector. Almost 45 per cent of depositors in India are not serviced by the formal sector, while only 11 per cent of India has access to formal loans, like from banks.  “We see this as an opportunity as we have established our ability to address the need of this segment,” states Vasudevan.  “Even if the NBFCs are servicing some of this sector, on cost of funds or lending rate they will not be able to compete with Equitas,” adds he. The company is raising money at the cost of the rest of the banking system and its lending rate will be substantially lower than what the normal NBFC can lend at, he reasons.

As the banking operations start in full swing, every client the company gives a liability product to, can potentially be converted to a depositor. The company is also planning to forge an alliance with insurance companies and offer insurance products to its customers.  It is planning to work on the National Pension Scheme.  “As a bank, there are so many things we can do to influence the low income people. In the medium term, our motto is to reach a situation where these people borrow to grow their business or buy assets,” says Vasudevan, on a concluding note. These days Vasudevan has a relaxed demeanour, dressed in his red T-shirt and Khakis. We’re told that this is in line with Equitas’ new brand positioning – that of being a ‘fun bank’ – in the marketplace.

On its fun banking strategy: “As a bank we looked at what positioning we wanted and fun banking was a suggestion that caught on with the entire team. Even at the branch level, there will be something more on offer when compared to other banks. We will make the process and delivery fun, though the transaction will continue to be as serious as it is always.

How did you prepare for the road show?

The company had its first road show in the beginning of January. However, the response from the investors was not euphoric. It was period when the banks were being pummelled by RBI to disclose their NPA and the bank stocks was going down. The company countered this issue by offering more data about itself. “We drilled deep into our financials. Made it division wise, product wise and people asked me questions about competition.  And we got into industry comparison and created a large template of comparisons. This went on for almost three months,”  says Vasudevan.

Financial Performance

(Rs. in crore) H1 2017 FY 2016 FY 2015
Total Revenue 732.58 1114.87 755.93
Profit after tax 107.52 167.14 106.60
EPS 3.27 Rs. 6 Rs. 4
Amount raised Rs. 2,175 crore in April 2016


Rs.183.30 (Oct 21, 2016)


Rs.6071.95 crore

Market Capitalisation

The next phase of maturation

In conversation with Dr. B. S. Ajai Kumar, founder & Chairman, HealthCare Global (HCG) Enterprises, on his experience of spearheading the company’s public listing.

“Planning for an IPO in India is a process that involves a lot hard work, commitment and team effort,” confesses Dr. B S. Ajai Kumar, founder, chairman and CEO, HealthCare Global Enterprises Ltd, a speciality healthcare provider, that came out with its public offer in March this year. When he kick-started the IPO process a year back, he didn’t worry about the right timing for the IPO, as he believed there is no ideal time and an IPOs success depends on the ecosystem and the confidence the company has in its growth, and the support from the board of directors and investors. “One can always second guess the right time. My way of looking at it is, after evaluating everything, take a decision and stick to it and don’t look back,” he says.

For the HCG chief, raising funds from the market was really not the issue but the IPO was more a sign that the organisation had become mature enough to enter the next phase.  “It was time to move from being backed by PE player to become a public company,” he simply says.

This oncologist-cum-entrepreneur took the decision to set up his own hospital in India when he observed the poor state of cancer centres during his trip to India from Austin, Texas. At that time, he noticed that therapy which was phased out in the U.S, was still being used in India and hence, with an objective of overcoming the hurdles to accessible, affordable and quality cancer treatment, he set up Healthcare Global Enterprises (HCG) in 2003 as a chain of hospitals providing complete care for cancer patients; from diagnostics to post treatment management of the disease.

He built the hospital with a focus on strong principles that include conducting the business with integrity and reinvesting profits to ensure growth. And this has translated into good growth in its top line from Rs. 26 crore in FY 2006 to Rs. 600 crore in FY 2016 with over 170 doctors and 20 hospitals across the country. It has chosen to partner with doctors or centres that have a strong local understanding of the region they operate in and are keen to share the HCG journey. This enables the company to combine their respective expertise and provide holistic treatment.

With an intention of creating a high quality outcome, the hospital is also heavily investing into R&D and technology. “Growing the hospital and ensuring that patients across the world have a good ecosystem and proper treatment has given us the dividend and that’s the focus going forward,” states Ajai Kumar. However, his journey of taking his company public was rich and filled with tremendous learnings that he agreed to share for this article.

The beginning of the IPO saga

Since 2006, the hospital received private equity funding to the tune of US $10 million from IDFC Alternatives and India Life Sciences Fund (who have since exited), Premji Invest, India Build Out Fund (now under Quadria Capital) and Temasek.  In March 2016, HCG raised Rs.650 crore by offering 29.8 million shares to investors (when three more investors also partly exited the venture).

Once the board gave its approval to go public, the company worked on getting the investment bankers on board. “This was a great learning experience: how valuations are arrived at, what are pros and cons of going public, obviously moving from private to public limelight and being responsible to common shareholders is a great responsibility and this takes you to another level and is part of the maturation process,” says he. The company identified its team of bankers –global and domestic – as well as lawyers and these groups were identified after a significant screening process.

The company then meticulously put together a checklist, with the help of lawyers, to see where it was with SEBI. “We had to meet with varied  information on how was initial stock obtained, story behind the story, entire forensic of promoters and to some extent the board of directors,” says Dr.Ajai Kumar.  And once all the factors got sorted out, the company was ready to go public by January or February this year.

The next steps were to identify the time, analyse the ecosystem and interest by investor community for which it did road shows in India ,U.S., U.K., Singapore and Hong Kong. The company met almost 400 investors and investor groups, and this was taken up by different bankers. In the second road show, potential investors were invited to visit its centre and see the hospital and several Q&A sessions were done and, eventually an anchor group of investors was created, the IPO date was fixed and we went public on March 30.

The company has made necessary changes to its processes and systems to comply with regulatory requirements under laws of SEBI as well as the stock exchanges. Also, given the wider investor base post IPO, which includes mutual funds, FIIs, and HNI and retail investors, it has established an investor relations team to interact and address these queries.

Getting over the hurdles

With private equity companies on the board, valuation was being scrutinised very closely apart from the acceptance of the IPO in the market and the profitability at the time of the issue. So the challenge was to get board consensus which we were able to do successfully.

Another question was on the preparedness to go public, as it is a long drawn process. “We are a focussed cancer group and at that time not many healthcare companies were in the public market. It is not like we are going to be a big cap company. But, the questions that needed answers were –why IPO now? Why not make it a bigger company and then IPO,” recalls the leader. However, he says, “We have had PE investors for several years. We have a huge growth opportunity in the future and want the public to be our partner in this growth opportunity. The type of company that we have created: transparent, ethical with governance, should be appreciated and public should participate and reap the reward along with us.” Dr. Ajai Kumar also adds, “I started this hospital as an individual, created certain value and people invested because of our ethics, transparency and governance apart from the professional skills.”The hospital has also received good public recognition and is a part of a case study at Harvard Business School.

Life after the IPO

“Post IPO, things have not changed drastically except that we deal with more independent directors, there is a silent period where we do not take part in any stock transactions, etc.” states the doctor. There are only compliance issues which gets handled the way it should. The company has made some changes to its team and has added a new CFO. It is also training people so that organic growth can happen internally and it can empower its people to grow within the organisation.

The organisation is anticipating good growth going forward and is working on several new projects.  The challenge, the leader admits, is to convert them to reality and work with the partners to make it happen. In the next 3 to 5 years, the company wants to make treatment more widely accessible, maintaining the high quality. The company has completed almost 1000 cases in Molecular genomics (next generation sequencing) over the last year or so. It has also started performing liquid biopsy in the last three months. Its centres are doubling and by end of 2018, its current  14 centres will become 26. The centres see around 40,000 new patients which will increase with the doubling of the centres.   “We want to make sure that proper execution is done; proper systems are put in place, with a clear focus on constantly improving and enhancing patient outcomes,” says Dr. Ajai Kumar, as the conversations comes to a halt.

The IPO is a sign of the organisation maturing and entering the next phase.

Financial Performance

(Rs. in crore) Q1 2017 FY 2016 FY 2015
Total Operating Revenue 133.67 581.98 519.38
Profit after tax 5.69 5.43 4.70
Amount raised Rs.650 crore in March 2016


Rs.236.95 (as of October 21, 2016)


Rs.2024.81 crore

Market Capitalisation


The road to an IPO

Ajit Issac-led Quess Corp completed a successful IPO in June 2016, raising Rs. 400 crore. We caught up with the promoter to gather insights on getting ready for a successful public listing and plans for the future.

For Ajit Isaac, the year before his company, Quess Corp, went public in June 2016 was a very busy phase, not just with IPO activities, but also in ensuring the rechristened Quess Corp (from the earlier known name IKYA Human Capital Solutions Limited) was evolving in line with the company’s vision of transforming into a global company.

Incorporated in 2007, the company had gradually shifted from being a HR firm to an integrated provider of business services (such as facility management, industrial asset management and IT services) and wanted its brand name to reflect that. “This shift from IKYA to Quess and from being a HR firm to being an integrated provider of business services was in progress a year prior to the IPO and I was focused on charting out how Quess was evolving,” says Isaac, managing director and CEO.

The company raised Rs. 400 crore from the public and plans to use the net proceeds of the issue for repayment of debt; funding capital expenditure and its subsidiary, MFXchange US, Inc.; funding incremental working capital requirement, acquisitions and other strategic initiatives.

Isaac takes us through his entrepreneurial journey till he took the company public and some key lessons he learnt along the way.

A journey to remember

“We set forth on our journey with about 10 people on board, armed with nothing more than a collective vision and a firm determination to turn ideas into reality. We did a lot of things that seemed crazy at the time. Each of those “crazy things” has now grown to be market leading businesses,” recalls Isaac fondly.

The company started off as a provider of human resource services and has evolved into managing the entire SG&A function of its clients. While the largest part of its business was the staffing business segment and the company found that its margin was not crossing two percent.

So, the company wanted to expand its platform and drive up themargin. Additionally, it found that there was a large market for business services as companies were outsourcing anything that was not core to their businesses. “When they were outsourcing, it was mostly unstructured.  So, we decided to build a business services platform to deliver multiple services to clients and get a larger wallet share of their non-core activities,” says Isaac. And, this led to the transformation of becoming an integrated business services provider.

It is currently 130,000 people strong and has customers spread across 8 countries. Isaac has developed a strong team of leadersand currently, each of the businesses of Quess is being run by an independent CEO, who brings along with him significant management depth and industry expertise. “This is critical if we are to continue growing without management bandwidth becoming a constraint,” says he.

The company has grown its top line in excess of Rs 3,400 crore for FY16, with 5 year CAGR in excess of 50 per cent. Its EBITDA has grown by more than 5.5 times since FY12 to Rs 172 crore. “The client-focused culture at Quess has been the reason for our rapid growth in revenue and profitability,” says he. Many of the services that the company has launched and the geographies it has entered have been due to the demands placed by its customers.

2015 onwards, the company has completed several major acquisitions (9 acqusitions so far) and has been working closely with these new companies to turnaround (if needed) and integrate its various businesses. Isaac says, “My efforts were also towards ensuring that a consistent message went to potential investors about what Quess stands for as a brand and how our past growth was in line with our strategy of being an integrated business services company.”

Getting IPO ready

Setting aside the macro and sector level issues, a company is ready for listing when it is ready to take responsibility, explains Isaac. While macro factors might impact the timing, what is critical is that the company and management have a compelling investment thesis and can communicate the same to the broader market effectively. In addition, internal readiness to face the increased scrutiny by external investors, and regulators is a key decision point. This apart, Isaac points out that there has to be a great management team that is responsible to a large base of public investors.  “That preparation had happened by virtue of continuously improving the management team,” says he. And if a company brings in new capital, the expanded capital base should deliver competitive return on capital numbers to what existed earlier. “We increased margins year-on-year for last three years and going forward, will retain this momentum. We used our business platform and margin expansion strategy to work on expanding our ROC even on the larger capital base. These factors contributed to us thinking that we can go ahead with the IPO,” says Isaac.

Fine tuning the processes, post-IPO

It is critical that the processes and systems for the post IPO period be in place much before listing. “A lot of investment and management bandwidth needs to go into ensuring that the organisation as a whole is IPO ready,” opines Isaac. He makes a few suggestions: The reporting mechanisms need to be tested out in advance to ensure a smooth transition post listing. It would be foolhardy and even dangerous for the management to start work on setting up processes and systems, after listing. In this process it is important to treat the IPO not as an end in itself but as a means to a longer term relationship with the investor community. “A big change that happens after the IPO is the need to deal with the investors and the people with themedia who are tracking our performance,” observes he.

Growing from here

The company aims to identify areas in which it can grow and expand into that market through possible acquisitions.  Citing an example, Isaac says, “We are not present in the security services business and we may do an acquisition there.”Talking about organic growth, Isaac says that 80 per cent of the company’s growth is through the organic route.

By redefining the organisational focus to a range of business services, the company has given itself a a wide canvas to work with. “Both within and outside India, we see a significant need for a reliable partner that can take on all non-core activities of a company and deliver results. By offering a one stop platform for all such needs, we expect to be able to garner both wallet share and mind share of customers,” says Isaac, on a concluding note.

Quess currently employs over 130,000 people and has customers spread across 8 countries.

Financial Performance

(Rs. in crore) H1 2017 FY 2016 FY 2015
Total Revenue 2008.66 2925.72 2378.68
Profit after tax 54.81 84.40 62.63
EPS Rs. 4.61 Rs. 7.45 Rs.6.79
Amount raised Rs. 400 crore in June 2016


Rs. 626.05 (As on October 21, 2016)


Rs. 7,748.78  crore

Market Capitalisation

Internal preparation for an IPO

  • Absolute clarity on the end result of the listing journey. The promoter needs to know what he seeks to achieve as a result of the listing. It is critical for the promoter to remember that listing is not the end result, but merely the means to an ultimate objective.
  • Focus and invest in setting up robust and regular management reporting mechanisms (financial, operational and secretarial). This is going to be critical both during the listing process and post listing.
  • Invest in setting up a strong second leadership line. This is something that would need to start much before the listing journey.
  • Focus on a consistent message that ensures that only investors who resonate with that message and the longer term growth plans of the company decide to invest

Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.

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