IndiaTech, a lobby group that aims to create a level playing field for domestic startups, is now seeking the support of various government departments to ease listing norms for consumer internet ventures.
In the last one month, the lobby group has reportedly held multiple talks with policymakers tasked with regulating the country’s startup ecosystem, including the Department of Industrial Policy and Promotion (DIPP), Securities and Exchange Board of India (SEBI) and the commerce ministry and NITI Aayog.
It is now looking to submit a white paper on the same in the next few weeks. Rameesh Kailasam, the chief executive of IndiaTech, reportedly said that they have been reaching out to all stakeholders and educating them on the need for reform.
IndiaTech was conceptualised in 2016 by Flipkart’s cofounder Sachin Bansal. The aim was to form a trade association to solely fight for local consumer Internet sector companies such as Flipkart and Ola, with the Indian government to create favourable laws against global competitors.
According to those familiar with the group’s views, the group behind Indiatech believes that if home-grown Internet firms do not succeed, India will likely lose $10 Bn of FDI per year, $1 Bn of tax revenues per year and a million jobs that could have been created based on the numbers extrapolated from China.
The new set of discussions focus more on the lines of policy recommendations as the group believes that the easing of listing norms is primarily for mature, high-growth internet companies that already command significant valuations and are recognised as leaders of their particular segments.
It is to be noted that under the present regulations, the companies looking to list have to meet certain mandatory requirements such as promoters have to own at least 20% of the venture and they need to have net assets and show profitability for at least three years.
However, startups can list through qualified institutional placements (QIP) where at least 75% of the stock has to be offered to institutional buyers. Additionally, the largest stakeholders in the startups will also have their shares in the venture locked in for a period of three years.
In fact, in high-growth ventures, it is often the investors that own the largest amount of stock in the company, rather than promoters.
SEBI had been in talks with the National Stock Exchange (NSE) since 2018, discussing the changes needed to be included in the Emerge ITP platform to help the startups scale up. At the same time, it has also discussed with stock exchange regulators Bombay Stock Exchange (BSE) for launching a startup platform to help the listing process by tech startups working across sectors such as IT, ITES, biotech, 3D printing, spacetech, and ecommerce among others.
SEBI has recently changed the listing norms for startups, where proposed changes include renaming the ‘Institutional Trading Platform’ (ITP)to ‘Innovators Growth Platform.’
With regards to IPO’s in India by startups, 2017 proved to be a blockbuster year with a record 122 companies raising a staggering $10.85 Bn through IPOs, however, 2018 witnessed the bigger performance.
An EY India’s IPO Readiness Survey Report showed that India IPO activity was at a comparably higher level and saw 90 IPOs raise $3.9 Bn, driven by solid activity in Q1 18.