SME promoters fear IPOs due to 10 myths.

Truth: going public amplifies control, drives governance, builds trust and unlocks growth.

Let’s build Bharat through capital markets.

Top 10 Myths About Going Public for SME Promoters

Myth 1: IPO is only about raising funds.

Reality: The primary benefit of an IPO is enhanced credibility, transparency, and governance, which attracts long-term investors. Capital is only a temporary benefit; the governance framework is permanent.

Myth 2: “We’ll fix compliance later.”

Reality: IPO preparation requires stringent and often multi-year financial audits and legal compliance. Delays most often occur due to pre-existing non-compliance issues.

Myth 3: Valuation automatically goes up after listing.

Reality: The market rewards consistency and strong governance, not merely the act of listing. Companies can lose significant market capitalization post-listing if performance is inconsistent or communication with investors ceases.

Myth 4: A merchant banker will handle everything.

Reality: Merchant bankers are facilitators. The promoter’s active involvement is crucial for preparing the offer documents, engaging in investor roadshows, and defining the pricing strategy. The company’s unique story needs the promoter’s voice.

Myth 5: “We’ll plan for the IPO when we’re ready.”

Reality: IPO readiness is a process that can take 2-3 years, not an event. The most successful IPOs are built with clean books, clear narratives, and predictable numbers well in advance.

Myth 6: Going public is only for large, financially stable corporations.

Reality: SME-specific platforms exist (like BSE SME) with tailored eligibility criteria. Companies go public to raise funds for growth, which implies they need capital, not necessarily that they are already cash-rich or perfectly stable.

Myth 7: Promoters lose complete control over the business.

Reality: While a degree of control is relinquished to shareholders and independent directors must be appointed, effective corporate governance involves professional management, not a total loss of autonomy. Promoters must adapt from a family-driven to a professionally governed mindset.

Myth 8: Going public is too expensive and complex for an SME.

Reality: The costs and complexity are manageable with proper planning and the right expert guidance. Engaging professional consultants and planning the expenses in advance can mitigate the financial burden.

Myth 9: Market hype and oversubscription guarantee success.

Reality: Hype does not guarantee strong post-listing performance. Many highly anticipated IPOs have underperformed, while lesser-known companies with solid business models have thrived. Success depends on fundamentals and sound business potential.

Myth 10: Promoters are not ready for public scrutiny.

Reality: A public listing brings inevitable media, regulatory, and investor scrutiny. Promoters must be prepared for transparency and accountability as cornerstones of a successful public company, which ultimately builds investor trust. 

Team: StartupIndia.Club

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