The Securities and Exchange Board of India is likely to come out with special concessions as early as June for new age technology start-ups to list in the country.

This includes easing norms on profitability track record, definition of promoter, objective of the issue and lock-in period for promoters.

For example, under the existing regulations, the promoters are required to offer a minimum 20 per cent of post-issue capital as lock-in for a period of three years.

However, many start-ups have lower holding by founding-members (often less than 20 per cent) and a large holding of institutional investors. SEBI has now proposed that the lock-in of the entire post-issue capital should be for a period of six months uniformly for all shareholders.

Similarly, existing regulations require the company to disclose the basis for issue price, including disclosure of earnings per share and pre-issue average return on net worth.

SEBI has now proposed that the basis of issue price may include disclosures as deemed fit by the issuers accessing the market.

For tech firms initially “It is proposed that the new platform for raising money within the country will be initially made applicable to companies which are in the area of software product development, e-commerce, new-age companies having innovative business model, etc., which create new business opportunities or which serve important efficiency enhancement in existing business activities,” the market regulator said in a discussion paper released on Monday. Speaking at the sixth Capital Markets Summit organised by CII on Monday, UK Sinha, Chairman, SEBI, said some of the start-ups have wonderful products with business models capable of competing with the best in the world, but many of them are thinking to list abroad because of certain issues here.

Likely by June-end Sinha said the new regulations could be in place by the end of June.

“If the capital-raising process in India is not further relaxed for such issuers, they may be driven to list on stock exchanges outside India. It has been a challenge for SEBI to simplify the capital-raising process for such issuers while protecting the interest of retail investors,” SEBI noted in the paper.

Sinha said stock exchanges, Sidbi, Indian Venture Capital Association and SEBI have been meeting promoters of a large number of small and medium enterprises to understand their problems. One of the concerns the SMEs have is whether they will face any income-tax problems, besides fear of compliance and difficulties in meeting accounting and other processes.

They also want to know whether investors will start dictating terms to their board once the company is listed.

Related Topics