In a bid to make it easier for startups to access capital in India, the Securities and Exchange Board of India (Sebi) is likely to exempt them in case they plan to sell shares to the public through the proposed alternative capital raising platform from the mandatory promoters’ holding lock-in period, facilitating easier fundraising and investor exits.
Besides, the capital market regulator may also exempt all classes of stakeholders in startups from any lock-in clause while listing on exchanges, according to the LiveMint report. The final listing guidelines for startups will be announced next month.
Under the existing rules, a minimum promoters’ contribution (20% of post-issue capital) is locked in for three years from the date of commencement of commercial production or date of allotment in public issue, whichever is later.
Earlier in March this year, Sebi had proposed relaxing listing rules for startups with an aim to encourage domestic investors to bet on the country’s booming online economy and to provide early backers of startups an opportunity to sell their holdings. Today, India is home to nearly 3,500 startups and become the world’s third largest base for startups after the US and the UK.
The industry experts believe that this move will allow many existing investors in startups to exit their holdings with ease and attract new investors without worrying about getting their investment locked in for a given period.
The person familiar with the development said, “A number of companies in the startup space have private equity, venture capital and angel investors as the main shareholders who are looking for opportunities to redeem their investments in the company. Besides, Sebi also aims to ensure that the growth of innovative businesses is not deterred. And an exemption from lock-in will facilitate easier entry and exit of shareholders in startups.