SEBI Simplifies Framework For Startups To Switch To Main Board Trading: Here’re The Criteria

Securities and Exchange Board of India (SEBI), on September 23, announced a framework to allow startups to easily switch from Innovators Growth Platform (IGP) to main board trading.

Under the SEBI’s new framework, startups should have profitability of three years or at least 75% of its shareholding with “qualified institutional investors”(QIB) for the option to trade under the regular category. The guidelines also require promoters’ contribution, which includes offerings made by alternative investment funds, foreign venture capitalist, scheduled commercial banks, public financial institutions or insurance companies, to be 20% of the total capital.

Moreover, the contributions should be locked in for a period of three years from the date on which the company is allowed to trade from the main board trading.

The Other Guidelines To Switch To Regular Trading

• The startup will have to be listed on the Innovator Growth Platform Platform (IGP) for at least one year
• The company should have a minimum of 200 shareholders while requesting to switch to regular listing
• The company, its promoters, promoter group or directors are not debarred from accessing the capital market by the board
• None of the company’s promoters or directors should be the head of any other company which is prohibited from accessing capital market by the board
• The company or any of its promoters should not be a “wilful” defaulter
• None of the company’s promoters or directors should be a “fugitive” economic offender
• The company’s net tangible assets should be at least INR 3 Cr in each of the preceding three years. More than 50% of this asset should be monetary
• The company’s average operating cost should be a minimum of INR 15 Cr in each of the preceding three years
• The company’s net worth should be at least INR 1 Cr in each of the preceding three years

SEBI has also received suggestions to reduce the minimum requirement of investors from 200 to somewhere between 50 and 100, as startups generally don’t have a large investor base. The companies believe that a lower threshold will help the platforms attract more issuers and investors.

The Indian government allowed startups to list for trading in 2015 through the Institutionalised Trading Platform (ITP). However, after a lukewarm response, the market regulator relaxed norms in December 2018 to boost startup listings. SEBI also decided to rename ITP to ‘Innovators Growth Platform’.