Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey has urged entrepreneurs not to view raising capital through public markets merely as a fund-raising event or an exit route, but to treat public markets as long-term partners in growth.
Speaking at the Fortune 40 Under 40 awards in Mumbai on August 26, Pandey said a company’s ability to raise capital does not necessarily mean it is ready for public capital, given the greater accountability that comes with being a listed company. Public companies are accountable to a much wider set of shareholders, many of whom invest their household savings in the markets, he said.
Pandey said the discipline imposed by public markets can have a positive impact on companies and help strengthen institutions. He also urged businesses not to measure or celebrate entrepreneurship solely on the basis of valuations, funding rounds or market share, but also by the value they add to the economy.
Highlighting the importance of corporate governance, Pandey asked new-age companies to build boards capable of supporting them over a five-to-10-year period rather than treating board formation merely as a regulatory requirement. Companies should pay particular attention to the interests of minority shareholders, he said.
There can be no trade-off between good governance and business performance, Pandey said, adding that the two should complement each other. He described trust as the link between these objectives and said businesses need to earn it to strengthen investor confidence, improve access to capital and encourage shareholders to remain invested through difficult periods.
Pandey also said a larger and sustained contribution from industry would be critical for India to narrow the gap with other major economies in research and development spending. This would require patience, experimentation and boards willing to support long-term capacity building, he said.
Corporate boards should also make technology a priority as businesses contend with risks accompanying innovation, including cyber incidents, data breaches and technology dependencies, Pandey said.
He concluded by urging entrepreneurs to expand their influence beyond major urban centres into tier-II and tier-III cities and smaller locations. Such expansion, he said, could help smaller entrepreneurs and producers participate in the formal economy by improving access to jobs, technology, finance and markets.