Indian Startups IPO - Can loss making companies launch an IPO?

General
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Can start-ups like Ola, Paytm or Swiggy launch go public (IPO) even if they are loss making?

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A company can go public even if it is loss-making. The Issue of Capital and Disclosure Requirements (ICDR) Regulations from SEBI provide for two categories of filters for a company which seeks to go public:

A. Primary filter (u/s 5) - If any of the following is true, the company will not be eligible to issue shares to the public:

  1. Entity/promoter group/directors/selling shareholders are debarred from the capital market

  2. Promoter/Director of issuer entity is a Promoter/Director of a debarred entity

  3. Issuer/Promoter/Director is a wilful defaulter

  4. Promoter/Director is a fugitive economic offender

  5. Outstanding convertible securities (other than ESOPs) which can be converted to equity after RHP filing date.

B. Secondary Filter (u/s 6(1)) - If any of the following is not true, the issuer has to allot a minimum of 75% of the net offer to QIBs u/s 6(2) (or refund all application money collected):

  1. Tangible assets of at least 3 crores for each of the last 3 years.

  2. Minimum average operating profit of 15 crores in the last 3 years.

  3. Networth of at least 1 crore in the last 3 years

  4. If the name has been changed in the last year then at least 50% of the revenue comes from the activity indicated in the name.

So, if a start-up can get QIBs (Mutual Funds, AIFs, etc) to back at least 75% of the issue then they can go public even if making losses. Ujjivan Small Finance Bank did not have a history of 3 years, so it had to go public u/s 6(2). Retail Investors had a reservation of 10% in the issue, unlike the usual 35% for issues u/s 6(1).

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