16/02/2022
Zerodha and Zoho have posted a net profit of Rs 1,122 Cr & Rs 1,918 cr in FY21.
But why do these profitable private companies do not go for IPO?
Here's a thread! 😎
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Few disadvantages for the companies who go public offer their IPOs:
1. Public disclosure
When a privately held company offers its IPO, it has to disclose a number of private documents to the public like its financials, promoters, shareholdings, debts, compensations, etc.
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2. Market pressure
The company's performance is closely scrutinized by the public and investors.
Hence, the company’s management is consistently is pressure.
In the market, companies often focus more on short-term performance than long-term due to market pressure.
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3. Entering a Regulated market
Indian stock market is highly regulated by the Securities and exchange board of India (SEBI).
Hence, the newly public company has to play by the rules of SEBI.
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4. Loss of control
As the shares are distributed among the investors after the IPO, the decision-making power is now in the hands of the shareholders.
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5. Failing of IPO
Many companies fail to attract investors during their IPO and the offered shares might remain under-subscribed.
In such a scenario, the company is not able to raise enough capital that is expected to achieve the goal of IPO 😃
Disclaimer: All containts are for education and awareness purpose.
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