New listing platform for startups
Bombay Stock Exchange (BSE) has launched a platform through which startups can be listed in the stock exchange.
This platform by BSE will be launched On July 9 as per the reports of a BSE official.
BSE is claiming it to be world’s fastest exchange platform. The listing of the companies will be on the basis of listing startups from the following sectors; Nanotechnology, robotics, artificial intelligence, hi-tech defence, genetic engineering.
This step by BSE has been taken to make listing attractive for the startups. Further incentive to startups provided by the exchange is announced for startup platform at MSME segment.
Certain criteria have been set up by BSE that the startups have to fulfil for all the sectors specified above:
• The company should be in existence for a minimum of 3 years from the date of filing prospectus with BSE. Further, the company needs to have positive net-worth.
• The startup seeking to be listed must have pre-paid up equity share capital of minimum 1 crore.
• The startup companies trying to be registered should not have any matters pending with NCLT for bankruptcy or insolvency.
• The companies should have QIB investors
• The said firm seeking listing should have angel investors for a minimum period of 2 years, and the aggregate investment should be at least of Rs 1 crore.
The platform is likely to connect the expanding businesses to a sophisticated reserve of Investors while offering a large variety of investment opportunity to the investors.
Reasons why start-ups should opt for listing
The main reason companies would want to go public is to raise money for their companies. The risk of ownership which if the company not listed lies solely on the directors; whereas if the company is listed the risk gets distributed amongst the large group of shareholders.
• If the startup is listed, it is most likely that they have leverage when they apply for loans from a financial institution.
• The company gains market exposure and could gain the attention of institutional investors or Hedge fund traders.
• Listing in any stock exchange increases the credibility of the company among the public, and this is an excellent way of indirectly endorsing the company.
• Public listing the companies in the stock exchange is a great exit strategy although startups have only gone for a traditional way where the exit has happened only when private equity firms take the acquisition of these companies.
Take for instance the case of Matrimony.com; the company brought in a lot of investors after listing itself. The significant benefit for the company was that the investors came to know about the company as a customer and hence were able to understand the business model clearly.
NSE CEO Vikram Limaye has also suggested to startups that have reached a certain size to go public as that would give them access to a deeper capital market.
Reason why most start-ups are not listed
India is the world’s third-largest start-up hub still there have been only 11 listing till date with SEBI. These numbers are unlikely to change unless specific measures are taken up by the government.
There is lack of trust or faith in the startup ecosystem. It is often that young startups have very complex structures and this puts off any investor they seek to include themselves.
One of the main reasons why startups hesitate to list themselves is because there are unfavourable conditions in the regulations.
SEBI has already taken steps to include the startups in its ambit. The measures taken up by SEBI regarding the listing involves angel investment and other frameworks.
The new platform is aimed to create a conducive capital market ecosystem for the new private or public limited companies that want to be listed in the stock exchange. BSE thinks that in next few months the startups will start listing themselves and will bridge the gap between capital markets and startup ecosystem.