SEBI to finalise norms for listing of startups to help them tap capital markets to raise funds

To help startups tap the capital markets to raise funds, Securities and Exchange Board of India (SEBI) will soon finalize norms for listing of such companies, although small investors might not be allowed to invest for at least a year.

According to PTI, the norms will be issued later this month or early next month, sources said. Under the new norms, the entire pre-issue capital is expected to be locked-in for a period of six months for all shareholders, sources said. At present, promoters are required to offer a minimum of 20 per cent of post-issue capital as lock-in for a period of three years.

Besides, SEBI is expected to make easier disclosure norms for startup listings. While filing the draft offer document with the capital market watchdog, such firms will only need to disclose broad objectives in line with the major international jurisdictions.

The new norms will help startup companies raise funds from within India and stop their flight to overseas markets. For want of a price discovery within the country, many of these companies plan to get listed in Singapore or the US.

The final guidelines would be put in place after taking into account public suggestions. In Late March, SEBI had floated a discussion paper and had sought public comments the same till April 20.

The Securities and Exchange Board of India (SEBI), in its discussion paper, had proposed an 'Alternate Capital Raising Platform', wherein startups and firms can raise money from institutions and HNIs from the capital markets under a relaxed regulatory regime.

However, retail investors would be restricted from investing in such companies, given the risks involved therein, the regulator had said in the draft papers.

Besides, SEBI has proposed that capital raising would be allowed on the Institutional Trading platform (ITP). The proposed platform will have two categories of investors - Qualified Institutional Buyers (QIB) and Non-Institutional Investors (NII).

The listing on institutional platform would be for a period of at least one year. After that, the company would have the option to migrate to main board subject to compliance with eligibility requirements of the stock exchanges.

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.

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