Companies getting ‘priced to perfection’ on basis of future growth potential: Zerodha CEO Nithin Kamath

Zerodha founder and CEO Nithin Kamath is back with yet another musing on the ongoing IPO frenzy among start-ups and unicorns. In what can be seen as a response to people anticipating a Zerodha IPO, Kamath also seemed to take a veiled potshot at the digital payments start-up Paytm on the subdued response to its IPO.

“Why not Zerodha IPO when you can potentially get ridiculous valuations? Firstly, we think an IPO is the beginning and not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially,” Kamath tweeted.

He added that at present, companies are getting “priced to perfection” on the basis of future growth potential and that he cannot think how a company can “outperform the already really high expectations that growth companies have today.”

He also talked about never setting any revenue or growth targets and believed that the rest will fall in place “if goddess of luck smiles”, adding that Zerodha’s core team “dreads moving away from that philosophy to be in a chase all the time, which it will be after an IPO.”

Kamath mentioned that this chase to roll out an IPO and get bigger numbers is more horrifying since broking is hardly predictable and you can never predict how Nifty Midcap index might turn in 3 years.

Back in October, Kamath had offered some advice to start-ups filing for and  rolling out IPOs. “And right place, right time. If startups IPO and create wealth for Indian retail investors in long run, that will be beautiful. For this, I guess the growth has to be sustainable, for which there has to be a shift to underselling and overdelivering as a listed business,” he tweeted.

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