Sebi notifies start-up listing norms; makes fund-raising easier

Making it easier for start-ups to raise funds, regulator 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 regulations for such new-age entities engaged in IT, data analytics, intellectual property, bio-technology or nano-technology 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 NSE 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 HNIs, as Sebi feels that 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 Rs 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 start-ups are already looking to tap this platform and the industry estimates suggest that 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 told PTI that 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 that many of these companies, which were 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.