The market regulator SEBI has come out with new norms for listing of start-up ventures and small and medium enterprises on the Indian bourses, which would offer exit opportunities to investors.
In the notification, SEBI has said that these ventures did not have to make an initial public offer. In June, SEBI had approved the amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without an IPO requirement.
Norms, eligibility
SEBI also said that a start-up or SME would not make an IPO while its specified securities are listed on ITP but can raise capital through private placement or rights issue “without an option for renunciation of rights.” Also, a SME will be eligible to list on the ITP, in case the company, its promoter, director, group company does not appear in the defaulters list of the RBI and there is no winding up petition against the firm, it added.
Exit opportunity
Further, SEBI said, the minimum amount for trading or investment on the ITP would be Rs 10 lakh, which would offer exit opportunities and alternate buyers instead of going through their network for angel investors, venture capital funds and private equity companies, according to industry watchers. Apart from exits, this move will also help investors to have a wider investor base, offer better visibility and fund-raising capabilities.
The Union Government had proposed in the Budget measures to allow easy funding to start-ups who are starved of capital due to access to capital markets without having to resort to the IPO route will enable more start-ups and SMEs to scale up and not lose out to competition for want of capital, Nasscom said in a statement. However, some start-ups were not convinced whether this would give them a right kind of boost.
“Such open trading market might would create ‘useless’ number pressure on the start-ups,” said Deepesh Agarwal, founder of MoveinSync, a start-up company.