Sebi to soon notify norms for listing of start-ups, SMEs

Market regulator Sebi will soon notify new norms for listing of start-ups and small and medium enterprises on stock exchanges without having to make initial public offer (IPO).

Also read: Sebi slaps Rs 25 lakh fine on 5 entities for non-disclosure

The Sebi board had in June approved the amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without an IPO. Sources said the Securities and Exchange Board of India is expected to notify the new regulations within a week.

Lack of exit opportunities for investors and restricted access to new ones is a major problem faced by start-ups and SMEs.

Sources said the move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities. Besides, the move will provide better visibility, wider investor base and greater fund raising capabilities to such companies.

Sebi, in June, had said that the minimum amount for trading or investment on the ITP would be Rs 10 lakh. Such companies would also be exempted from the requirements of having to offer up to 25 percent of shareholding to public
through an offer document in order to get listed.

Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they would not be permitted to raise capital, though they can continue to make private placements.

Further, listing on ITP by start-ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community.