Capital markets watchdog Sebi makes it a lot easier for start-ups to go public

NEW DELHI:  In a bid to make the equity market more accessible for start-ups, capital markets regulator SEBI on Thursday approved a slew of relaxations to norms, including reducing holding period for pre-issue capital. The current eligibility requirement under Innovators Growth Platform (IGP), for issuers to have 25 per cent of pre-issue capital held by eligible investors for two years period, has been reduced to one-year. 

The term ‘’Accredited Investor’’ for the purpose of IGP is renamed as ‘’Innovators Growth Platform Investors’’. Such investor’s pre-issue shareholding should be considered for the entire 25 per cent of the pre-issue capital of the issuer company, against the current limit of only 10 per cent. The market watchdog has also allowed start-ups to allocate up to 60 per cent of the issue size on a discretionary basis, prior to issue opening for subscription to eligible investors with a lock in of 30 days on such shares. At present, the issuer company is not permitted to make discretionary allotment.

In an action packed board meeting, the regulator approved revamping of delisting rules and rationalising the existing framework related to reclassification  of promoter and promoter group entities.

SEBI has said that delisting of start-ups should be considered successful if the post offer acquirer or promoter shareholding, taken together with the shares tendered and accepted, reaches 75 per cent of the total issued shares of that class; and at least 50 per cent shares of the public shareholders are tendered and accepted.

The board reduced the capital requirement for a firm for migration from IGP to main board by QIBs as on date of application for migration from 75 per cent to 50 per cent. Reacting to the proposals, TVS Capital chairman Gopal Srinivasan said, “Hopefully superior voting rights will have a sunset close. Tech companies (ex-ITES) need to become at least 20 per cent of the listed markets soon. This and insisting on local listing as mandatory for companies listing overseas will help achieve this.”