Sebi Floats Consultation Paper To Change Certain Norms For Startup Listing

The Securities and Exchange Board of India (Sebi) has proposed to tweak the regulatory framework for Institutional Trading Platform (ITP), aimed at making listing of new age startups more accessible in sectors like ecommerce, data analytics and biotechnology, etc.

Inc42 had earlier reported that Sebi is looking to relax startup listing rule in India to introduce several flexible measures.

The regulator, in a discussion paper posted on its website on Friday (September 26), has proposed to rename Institutional Trading Platform (ITP), the listing platform for startups, as Innovators Growth Platform (IGP); and has also suggested to make certain certain policy changes in the startup listing eligibility, among others.

Sebi came up with the revised consultation paper based on the recommendations of Primary Market Advisory Committee (PMAC). It contains proposals for certain policy changes to the ITP framework.

It has further sought public comments before November 16, 2018.

Background On Sebi’s Endeavour To Make ITP Platform Accessible

Sebi maintains that there has been a lot of activity in the startup space in India and interest has been evinced with regard to listing on the ITP by various stakeholders and industry bodies. The policy change is being made in view of the evolving Indian startup ecosystem.

Here’s the quick background on Sebi’s endeavour to make the ITP platform more accessible —

• August 14, 2015: ITP regulatory framework was put in place — vide amendment to the Sebi Regulations (Issue of Capital and Disclosure Requirements), 2009 — to facilitate listing of new age startups

• July 29, 2016: Sebi came up with certain recommendations to make the platform more accessible, but no amendment to the ICDR Regulations was carried out

• July 12, 2018: Sebi constituted a group to review the ITP framework, with representatives from the Indian Software Product Industry Round Table (iSPIRT), The Indus Entrepreneurs (TIE), the Indian Private Equity and Venture Capital Association (IVCA), law firms, merchant bankers, and stock exchanges

• The Group submitted its recommendations to Sebi suggesting certain policy changes, and discussed in the meeting of Primary Market Advisory Committee (PMAC) of Sebi.

Based on the recommendations of PMAC, a revised consultation paper has been prepared by Sebi, containing certain proposals for changes to the ITP framework.

Review Of Framework For Institutional Trading Platform

The regulator has proposed that IGP would be designated as a main board platform for startups with an option to trade under regular category after completion of one year of listing. Current rules say an entity listed on ITP can migrate to the main board after expiry of three years from the date of listing.

Further, Sebi proposes: “In order to be eligible for listing on the ITP, 25% of the pre-issue capital, for at least a period of 2 years, should have been held by Qualified Institutional Buyers/other regulated entities and/or Accredited Investors (AIs), of which not more than 10% should be by AIs,” in its discussion paper.

Sebi has also proposed to reduce the minimum trading lot size to $2.7K (INR 2 lakh) from the existing $13.6K (INR 10 lakh), also proposed to minimise number of allottees to 50 from the existing 200.

Besides, It has also proposed 10 crores as minimum net offer size to public.