SEBI relaxes regulatory norms for start-ups, approves trading platform

Mumbai: Retail individual investors will not be allowed to participate in the initial public offers (IPOs) being floated by the new age technological start-ups in India. The Securities and Exchange Board of India (Sebi), which unveiled the new relaxed regulatory requirements to enable new age technological startups and other companies to easily raise funds from the public, has kept the minimum application size at Rs10 lakh.

Since the norms governing the disclosure and other requirements have been significantly relaxed, the regulator wants to ensure that only well informed investors participate in such IPOs. The regulator said that a separate institutional trading platform would be created for these firms in which only institutional investors, family trusts, systematically important NBFCs registered with RBI, intermediaries registered with Sebi with networth of more than Rs 500 crore and high net-worth individuals will be permitted to participate. The minimum mandatory lock-in period for promoters and other shareholders have been relaxed.

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According to it, promoters and other pre-listing investors have to lock-in their shares for only six months as against three years for other companies. The regulator further said that the companies, which are intensive in their use of technology, IT, IP, data analytics, bio-technology and nano technology should allot at least 25 per cent of the pre-issue capital to qualified institutional investors.
In case of other companies, at least 50 per cent of the pre-issue capital should be allotted to institutional investors. “In case of public offer, allotment to institutional investors may be on a discretionary basis whereas to non-institutional investors, it shall be on a proportionate basis. Allocation between the said two categories shall be in the ratio of 75 per cent and 25 per cent respectively,” Sebi said.

“The Indian startup space is very vibrant and the country is ranked number five as far as startups are concerned. More than 3,100 startups are in the country and a large number of M&As have also happened in the space during the last few months. However, most of these start-ups were thinking of listing outside... We have made a very special provision for start-ups to list in India,” said U.K. Sinha, chairman, Sebi.“Sebi has ensured that startups find the listing process simple... We believe there is a good appetite among start-ups to consider listing in India,” said Harish HV, partner, Grant Thornton India LLP.