IPO Is Not A Bad Word

The recent blood bath at the stock market has actually made several solution
providers think twice about going in for an initial public offering (IPO). This
is why Allied Digital Services took to the podium to educate solutions providers
on avoiding financial advisors and instead consult category one-investment
bankers to ensure that the process for filing for an IPO is smooth and easy

Right now, not too many people are willing to hear about the initial public
offering (IPO). But IPO is not as bad as it seems. In fact, if one goes by the
recent past, solutions providers today seem to thrive on many three-letter
words, the most popular being NOC and IPO.

So what is it about an IPO that attracts so many solutions partners to
venture? Addressing a session on IPOs at the Solution Providers Summit, Bimal
Raj, CEO, Allied Digital Services decided not to deliver a presentation but to
talk ex tempore. This way he could sift the theory from the reality and let
people know the ground level realities while seeking for an IPO.

“IPO is a time consuming exercise. The success of the exercise would depend on the synchronization of the various promoters, bankers and institutional buyers who would together also be able to determine value of the share in the market” Bimal Raj, CEO, Allied Digital Services

Raj noted that the hardware industry was not a sweet spot for most venture
capitalists. Therefore, convincing people about an IPO was a tough job for
system integrators (SIs). Highlighting Allied's experience of coming out with an
IPO, he said, “The first thing that SIs must remember while thinking of an IPO
is that they should avoid financial advisors and boutique investment bankers and
instead, chose to go along with a category one investment bankers.” It is only
these bankers who can give the right advice as regards undertaking the IPO
process.

Most SIs have a revenue generation methodology that is not in sync with the
rest of the world. So they need to do a bit of restructuring and establish a
different revenue generation methodology.

This would be possible with the help of a category-one investment banker,
because they would help in correct evaluation of the process.

Participants at the session

What makes an IPO viable

According to Raj, whether an IPO is viable or not would depend on the stage
of growth of the organization. However he believes that an IPO is definitely a
viable option for most solution providers on the growth path, and is a much
easier process today than it was a few years ago.

Indicating that coming out with an IPO is a time consuming exercise, Raj said
that the success of the exercise would depend on the synchronization of the
various promoters, bankers and institutional buyers who would together also be
able to determine the value of the share in the market. At the end of  the
day, it is required that organizations considering an IPO consult the right
people, and follow the required procedures so that the company gets required
funding for future growth. “The rest is for you to see,” he added.

It was clear that there was no point-based agenda for companies seeking to go
public. There is no rulebook. In the end, each company will have a different
experience.

This is why it is necessary that every company take a closer look at where it
sees itself heading, and how soon it wants to achieve its goals. Once it has
determined this, it needs to take a close scrutiny of its finances to see how
much more funds are required for achieving these goals. Only then it should
consider an IPO.

A partner noted that going public also mean that his company would be in the
public glare all the time and all sensitive information which were earlier in
the purview only of the management will also get open for any investor.
Admitting this Raj stated that this is no reason for a company not to consider
it.

There are several com­panies in the wings waiting to take the IPO flight.
While most of these are the biggies in the solution providing community, even
the smaller ones are mulling over this growth path to take their business to the
next level.

DQC News Bureau