Sebi issues proposal for new fund-raising platform for startups

2nd Apr 2015
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Last year was a windfall for startups in India. Of the 304 deals tracked by YourStory, 229 had amounts disclosed totalling to a sum of $5.2 billion with biggies like Flipkart, Snapdeal, Ola, UrbanLadder, and Zomato leading the race.

To help startups and young entrepreneurs raise funds, Securities and Exchange Board of India (Sebi) recently proposed an 'Alternate Capital Raising Platform', wherein such firms can raise money from institutions and HNIs from the capital markets under a relaxed regulatory regime, according to PTI.

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The move is aimed at helping such companies raise funds from within India and stop their flight to overseas markets. Sebi has sought public comments on the proposal by April 20 this year.

However, retail investors would be restricted from investing in such companies, given the risks involved therein, Sebi said, while adding that the adequate disclosures would be required to be made without hampering the capital-raising potential of such firms in new-age sectors like technology.

Under the proposed alternate capital raising platform, money should be raised only from institutions and high net worth individuals by the new-age companies having innovative business model and belonging to knowledge-based technology sector.

"On account of the risk involved in investing in such companies, it is proposed that retail investors be restricted from investing in such companies," Sebi said in a discussion paper on 'Alternate Capital Raising Platform'.

For want of a price discovery within the country, many of these companies plan to get listed in Singapore or the US.

It is proposed that the new platform for raising money within the country will be initially made applicable to companies which are in the area of software product development, e-commerce, new-age companies having innovative business model.

Sebi may issue paper on listing norms for startups next week

Sebi is likely to put out a discussion paper on the listing norms for startups next week. Sebi Chairman U K Sinha last week met an eight-member team from startup think-tank iSpirt Foundation here to discuss the way forward for startups to raise funds from the primary markets.

The think-tank has been in touch with Sebi since mid-December to facilitate the rapidly burgeoning startup space to go public and raise funds. "This will stop the exodus of startups that choose to list on international markets currently," Sharma said. He, however, declined to comment on the contents of the discussion paper.

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