Earlier this year, Finance Minister P Chidambaram proposed listing of start-ups without the requirement to go through initial public offering (IPO) route. Putting life into this proposal, on 25 June 2013 SEBI, the market regulator SEBI announced the scheme under which start-ups can list themselves on the Institutional Trading Platform (ITP) without having to make an initial public offering (IPO) (also read about the startup stock exchange).
This move will help the existing investors in start-ups and SME’s to look at alternate means for exiting their investments and also provide an opportunity to the start-ups to bring new investors on board.
As per the framework under consideration, SEBI may allow listing of following types of companies;
– Operating for less than 10 years
– Having revenues more than 100 Crores
– Paid-up capital over 25 Crores
– Possible lock-in of promoter’s stake for a period of three years
The market regulator may restrict the trading in shares to ‘informed investors’ only with a possible relaxation/waiver of the 25% public shareholding requirement to address the concerns of the promoters. Also, the start-up may be asked to leave the ITP if its net worth crosses 25 Crores or has been on the ITP for more than 10 years. The investments will be in minimum tranches of Rs 10 Lacs each.The full text of SEBI’s announcement is still awaited and it needs to be seen how this will be received by the investor and start-up community. As they say, the devil is in the detail.
Merican Consultants Private Limited is a firm of Chartered Accountants based out of Bangalore focussed on advising small and medium sized businesses. Professionally managed by a young team of Chartered Accountants with diverse experience of working with large accounting firms , Merican Consultants is uniquely placed to deliver cost effective solutions to its clients in areas such as company incorporation, corporate taxation, accounting, internal audit, business advisory among others.