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Sebi
notifies start- up listing norms; makes fund raising easier
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PRESS TRUST OF INDIA
Mumbai, 14 August
Making it easier for start- ups to raise funds, the
Securities and Exchange Board of India (Sebi) on Friday notified a new set of
listing norms for such entities, including e- commerce ventures, on a
separate platform of domestic stock exchanges.
The new norms provide significant relaxations in the
disclosure requirements, while Sebi has also relaxed its delisting, takeover
and Alternative Investment Fund (AIF) regulations for such new- age entities
engaged in information technology ( IT), data analytics, intellectual
property, bio- technology or nanotechnology like activities.
The extensive changes in Sebi regulations would allow such
entities to get listed on the separate Institutional Trading Platform of the
stock exchanges such as BSE and National Stock Exchange and are aimed to
encourage the Indian start- ups and entrepreneurs to remain within the
country rather than moving abroad for funds.
However, the new platform would be open to only
institutional investors and high net worth individuals (HNIs), as Sebi feels
small retail investors need to be safeguarded against a higher level of risks
associated with this platform.
Sebi has kept the minimum trading lot and the minimum
application size at ₹ 10 lakh so that only sophisticated and large investors
come in. The companies can, however, graduate to the main platform later and
the small investors can also invest at that time.
There are expectations that a large number of startups are
already looking to tap this platform and the industry estimates suggest the
total funds to be raised by such entities can run into billions of dollars,
as it would be mostly the large investors who would be allowed on this platform.
Sebi Chairman U K Sinha had recently said such companies
might lack a profitability track record but many of them have huge potential
to become highly profitable.
The relaxations include removal of caps on the money spent
by such companies on publicity and advertisements as they need to spend much
more for such purposes.
There is also a significant likelihood that many of these
companies would eventually become eligible in a few years for listing in the
main market, thus enabling even the retail investors to participate directly
in their growth story, the Sebi chief had said.
Asked about his expectations for response to the new
platform, Sinha said, “ Their feedback is very positive... I am hopeful many
of these companies, being approached by Singapore and New York exchanges
earlier, would come and list here.” For their listing, Sebi has also relaxed
the mandatory lock- in period for promoters and other pre- listing investors
to six months, as against three years for other companies.
Besides, the disclosure requirements for these companies
have been relaxed.
At least 25 per cent of their pre- issue capital would
need to be with institutional investors for technology startups, while this
requirement would be 50 per cent for companies from other areas.
The new platform would be open to only institutional
investors and HNIs, as Sebi feels small retail investors need to be
safeguarded
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