With an aim to make it easier for homegrown startups to list their shares on local exchanges, market regulator, the Securities and Exchange Board of India (SEBI) is looking at options to ease rules on mandatory disclosure for the draft prospectuses of Internet-based companies. This move will definitely encourage domestic investors to bet on the country’s booming online economy.
According to the Reuters report, one of the main items that could be removed is the need to detail the use of proceeds from the initial public offering of shares. Currently, this is an obstacle particularly for tech startups, as they don’t usually use the cash to invest in plants, factories or mines. As startups operate without any tangible assets this creates an issue when declaring the use of proceeds.
The report further states that the other issues including accounting and financial reporting practices used by the ecommerce firms were also under review to ease pre-IPO disclosure requirements. There are reports that that SEBI chairman, U.K. Sinha, has also held meetings with startup executives and bankers to discuss the proposed changes.
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India has witnessed a boom in private investments in startups ecosystem in last 2-3 years. The global venture firms including Temasek Holdings, US-based Accel Partners, Japan’s SoftBank Corp, Tiger Global Management and Sequoia Capital are pumping huge capital in Indian tech startups.
Many Indian tech startups are planning to go public, however, none is currently expected to make its market debut at home which could lead local exchanges to a significant loss. Recently, homegrown ecommerce giant Flipkart has also announced its plans to raise $5 Bn through IPO in US bourses over a span of 18 months. Besides, Chennai-based online matrimonial portal, Matrimony.com is also planning to go for IPO and is eyeing a valuation of $450-500 Mn.
“Any initiative to facilitate transaction, exit, and listing is most welcome. SEBI has demonstrated willingness and foresight in improving the current state of affairs. The problem is that the pace at which the regulator is evolving is painfully slow,” says Angel Investor, Ajeet Khurana.
As per the investment bankers, the SEBI rule changes, if implemented, may encourage some of these companies to consider a listing at home, giving Indian investors the chance to put money into a sector that is expected to boom in coming years.