New-age firms rejig boards fast to plug IPO gaps: Longhouse

Indian new-age companies gearing up for IPOs typically rush to overhaul their boardrooms, by loading up on independent directors and plugging diversity gaps, a new Longhouse study shared exclusively with ET said.

The report, which analysed 187 external directors across 34 venture-backed startups that have listed since 2021, showed that nearly 90% of external directors were hired within six months of filing draft prospectuses.

In several cases where directors joined more than a year ahead was often because companies had initiated IPO processes earlier, then paused due to market volatility but continued building out boards anyway.

The report’s coverage ranges from companies in the 2021 cohort such as Eternal (then Zomato), Nykaa and Paytm to those that have gone public this year, including Lenskart, Ather Energy, Urban Company, Groww, PhysicsWallah and Pine Labs.

Eternal had expanded its board significantly ahead of its 2021 listing, inducting experienced governance and regulatory leaders such as Dutta, Sutapa Banerjee and Namita Gupta. Ather Energy, which was listed earlier this year, also strengthened its boardroom with senior industry leaders like former HP India and Microsoft India head Neelam Dhawan, who serves as the Bengaluru-based company’s chairperson.

Anshuman Das, CEO, Longhouse, said the appointment of external directors closer to filing of prospectuses can primarily be attributed to three factors. “First, these board members lend credibility to the IPO bound company for both retail and institutional investors. Secondly, Sebi has norms relating to board structures. IPO bound companies build their boards in adherence to that,” he said, adding that founders also choose board members who can help them navigate the public listing process.