Barack Obama backed 'Jumpstart Our Business Startups Act' helps Indian startups to list on US stock exchanges

MUMBAI: In April, US President Barack Obama signed a law to make it easier for small American businesses to raise capital. Many Indian startups are now plotting to take advantage of the so-called 'JOBS' Act and the looser regulations it has enabled to list on an American stock exchange.

The Jumpstart Our Business Startups Act, a rare piece of legislation to have won backing from both the Democratic and Republican parties, has provisions to reduce the cost of regulatory filing, eases compliance norms and allows companies to keep vital data confidential for much longer. These changes have caught the attention in India among beleaguered venture investors seeking exits and founders eager to encash value in their companies.

Among them is Uday Challu, who had considered the prospect of listing his six-year-old startup iYogi on the American bourses but was deterred by stringent regulations. Having raised about 317 crore in venture capital, the remote technical services provider co-founded by Challu was due to offer an exit to investors. With the JOBS law in place, he is now upbeat.

"The passage of the JOBS Act has prompted us to file for listing in the US over the next year," he said.

Analysts are of the view that more such venture-funded startups will seek a US listing in the coming months.

"Since the announcement of the JOBS Act, two of the companies we advise - one technology and a non-technology venture - have both initiated their listing process overseas," said Yogesh Sharma, a partner at consulting firm Grant Thornton.

Flipkart, InMobi too Mull Listing

Other companies evaluating a US listing are InMobi, a technology provider for mobile advertising that raised $200 million from Japan's Softbank late last year, and Flipkart, which received an infusion of up to $150 million from initial investors Tiger Global and Accel Partners.


Last year, Flipkart floated a holding company in Singapore and gave its chief financial officer Rajesh Magow a board seat. Magow, in an earlier job with online travel company MakeMyTrip, led the initial public offering process for a listing on the Nasdaq in 2010.

MakeMyTrip's share sale was the last IPO by an Indian company in the US, after those of Genpact and WNS Holdings. Flipkart and InMobi declined comment.

Entrepreneurs say the entire filing process has been simplified by the passage of the law.

One of the key regulations in the JOBS Act is that it relaxes the provision giving emerging growth companies five years as opposed to the earlier limit of two years to meet compliance norms.

This means that now for a period of five years, emerging fast growth companies in the US will be exempt from review by external auditors, resulting in significant cost savings.

"The key advantage in my view is the confidential filing which means that unlike in the past financial data can remain confidential till three weeks before the filling date," said Dhruv Shringi, founder of online travel company Yatra.com.

Within the investment community, investors see the law as a catalyst for strong exits. "US markets have always given better value and premium for technology companies and now the Act makes it far easier for companies overseas to list in America," said Kanwal Rekhi, founder of Inventus Capital, an early stage fund that has backed startups such as online ticketing firm RedBus.