Proposed changes in listing norms likely to benefit start-ups, investors

SBENGALURU: IPO-bound start-ups, which have been demanding revision in rules that govern the listing rules, may find a breather with the Securities and Exchange Board of India (Sebi) looking to amend some of the existing norms.

In a consultation paper released on Tuesday, the capital markets regulator suggested reducing the minimum lock-in periods post a public issue for promoters and pre-IPO shareholders as well as doing away with disclosure of details of the group companies. Industry watchers say that these recommendations will attract new-age companies, especially tech start-ups to go public in India.

Food tech major Zomato has already filed its draft red herring prospectus (DRHP) with Sebi for a `8,250 crore IPO, the first amongst the line-up of unicorns including PolicyBazaar, Delhivery, Nyaka to list on Indian bourses. According to Ashish Agarwal, vice-president, public policy, Nasscom, the consultation paper suggests progressive steps for the capital market. “The proposal to shift regulatory focus from the concept of promoters and promoter group to “persons in control” has been overdue and is welcome.

The wide definition of promoter isn’t helpful especially when we witness a dilution in their stakes from pre-listing to post IPO and hence the focus should be on where the actual control lies. Sebi has rightly recognised that the present lock-in requirements were only adding up to the barriers for listing in India,” he told this publication.

Unlike the traditional listed companies in India where the promoter groups or entities comprised of family and family owned businesses, the new companies are primarily backed by institutional investors and hence the concept of promoters/promoter group which was floated by the watchdog earlier may not be relevant in the present scenario with even the investors being clubbed under the term, according to experts. 

“The move to reduce the lock in period for the shareholders will galvanise the tech start-up ecosystem and help the founders/investors monetise their holdings,” pointed out Abhimanyu Bhattacharya, partner, Khaitan & Co.