To encourage listing of start-ups, Sebi today proposed an easier framework that allows more investor categories, relaxed shareholding norms and reduced trading lot amount.
In this regard, the markets regulator has mooted changes to the framework of Institutional Trading Platform (ITP), which has not seen much traction even though it was put in place in August 2015.
The rules were brought in to encourage Indian start-ups and entrepreneurs to remain within the country rather than go overseas for raising funds. Seeking to widen the eligibility ambit for getting listed on ITP, Sebi has proposed increasing the category of eligible investors when it comes to shareholding before the listing.
Besides QIBs (qualified institutional buyers), family trusts or systematically important NBFCs registered with the Reserve Bank of India, intermediaries registered with Sebi and category III FPIs (Foreign Portfolio Investors) would be considered, subject to certain conditions.
In the case of family trusts, NBFCs and Sebi-registered intermediaries, the net worth should be at least Rs 500 crore.
Entities such as those having a pooled investment fund with minimum assets under management of USD 150 million as well as those from a jurisdiction that is signatory to the International Organisation of Securities Commissions Multilateral Memorandum of Understanding would also be eligible.
The regulator has suggested tweaking the share allocation limit in entities listed on ITP. The proposal is to allow institutional and non-institutional investors to have a maximum of 50 per cent stake. At present, 75 per cent of the net offer to public should be allocated to institutional investors and the remaining 25 per cent to non-institutional investors.
In case of discretionary share allotment to individual institutional investors, the watchdog has proposed raising the ceiling to 25 per cent from the current 10 per cent level of the issue size. Another proposal is to do away with the current requirement that no person, individually or collectively, should have more than 25 per cent of the listed entities post-issue capital.
As per the discussion paper, minimum trading lot is to be reduced to Rs 5 lakh from existing Rs 10 lakh while minimum lock-in period of six months for the entire pre-issue capital would be made applicable on all categories of shareholders.
To make things more attractive, Sebi has suggested renaming the chapter on ITP to High-tech Start-up & other new business Platform. The discussion paper on review of framework for ITP, open to public comments till August 14, has been prepared after taking into consideration recommendations of Primary Market Advisory Committee and market participants feedback.