Following PM Modi’s call for Making India, world’s startup hub, The Security and Exchange Board of India (SEBI) has relaxed many rules and norms to make it easier for startups to raise funds and get listed on stock market.
The norms would specially benefit technically intensive startups like e-Commerce ventures. Under the new system, these companies can get listed on a separate ‘Institutional Trading Platform (ITP)‘ under domestic exchange boards like NSE and BSE. Some other rules related to disclosure requirements, delisting, takeover and Alternative Investment Fund regulations have also been relaxed by SEBI.
The new initiative is brought into the effect mainly to encourage Indian startups and entrepreneurs to stay in the country only rather than moving abroad for fund requirements. Moreover, a lot of India’s famed startups are either registered outside the country, or are planning to list themselves in more start-up friendly stock exchanges across the world, like the NYSE. SEBI’s move, is to limit that outflow.
However in order to protect small retail firms in the large market, SEBI has set the minimum trading lot and the minimum application size at Rs 10 lakh and will allow only institutional investors and HNIs with a minimum net worth of Rs 500 crore to access the platform.
Also with relaxation in disclosure norms, the companies listed on ITP need not go into details about their deployment of funds and also it does not have to divulge any details regarding group companies, litigation and creditors unless the information is material.
Another change which is particularly beneficial for investors is the relaxation in the mandatory lock-in period for promoters and other pre-listing investors to six months in the startups, as against three years for other companies.
In addition to it, the exit rules have also been modified and an entity registered on ITP platform may exit the platform on consent of shareholders by passing a special resolution via postal ballot where 90 per cent of the total votes and the majority of non-promoter votes should be in favor of such move.
The new platform has already been generating quite a buzz among various companies who are looking to access the platform and if industry reports are to be believed, the funds raised by these companies can run into billions of dollars as only large investors are allowed for this platform. Moreover, under the new norms, the limit on the budget to be spend on marketing and advertisement has also been removed by SEBI as these segments cannot be neglected in the modern industry.
Sebi chairman U K Sinha said about the responses,
Their feedback is very positive… I am hopeful that many of these companies, which were being approached by Singapore and New York exchanges earlier, would come and list here.