SEBI eases norms for public listing of startups

Market regulator Securities and Exchange Board of India (SEBI) on March 25 announced measures that will make it easier for startups to go public on the Innovators Growth Platform or IGP. The norms will also give early-stage investors in startups an easier way to exit.

The measures were announced following a board meeting.

SEBI has reduced the shareholding period for investors owning 25 percent in startups before listing to one year from two years.

It has also recommended a higher share of allotment of up to 60 percent of issue size to anchor investors, with a lock-in of 30 days on such shares. "It has been decided to allow the issuer to allocate up to 60 percent of issue size on a discretionary basis, prior to issue opening to eligible investors with a lock-in of 30 says on such shares," according to the outcome of the board meeting.

It has also allowed companies to issue superior voting rights to promoters, stating that issuer companies that have issued superior voting rights to promoters or founders will be allowed to list under the IGP framework.

SEBI has further relaxed the trigger for an open offer to 49 percent from 25 percent.

Delisting norms have also been relaxed, as a delisting under the IGP framework now will be considered successful if the shares tendered and accepted reaches 75 percent of total issued shares and 50 percent of public shareholders.

"The IGP required regulatory reforms in order to become attractive for startups to list and to account for the unique model of startup financing. Due to the thresholds for investments and the bar for only accredited investors necessitated lighter touch regulations, which is what the industry has conveyed to SEBI. SEBI has listened to the industry and allowed for greater flexibility in the regulations, allowing greater interoperability amongst the extant buckets and ease of delisting (crucial for M&A) will help galvanize support for the IGP and in time, make it the Indian analogue to the NASDAQ for Indian tech startups," said Siddarth Pai, 3one4 capitalS.

Reacting to the proposals, TVS Capital chairman Gopal Srinivasan said, "Hopefully superior voting rights will have a sunset close. Tech cos (ex ITES) need to become at least 20% of the listed markets soon. This and insisting on local listing as mandatory for companies listing overseas will help achieve this. Hopefully, migrating from IGP to the main board will be the way for the rivers to merge with the oceans."

NSE’s Innovators Growth Platform (IGP) is a public market platform for new economy companies both for raising funds as well as exploring exits.