Market regulator modifies rules to permit listing of start-ups and
SMEs in Institutional Trading platform without having to make an IPO
Mumbai : Market regulator Sebi has notified new norms for listing of start-ups and small and medium enterprises on stock exchanges without having to make initial public offer (IPO). The Securities and Exchange Board of India (Sebi) has made amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO.
Lack of exit opportunities for existing investors and restricted access to new investors is a major problem faced by start-ups and SMEs.
In a circular dated October 8, Sebi said that the minimum amount for trading or investment on the ITP would be Rs 10 lakh.
The move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities.
Besides, the move would provide better visibility, wider investor base and greater fund raising capabilities to such companies.
Sebi said the company would not make an IPO while its specified securities are listed on ITP but can raise capital through private placement or rights issue “without an option for renunciation of rights.”
According to Sebi, a SME will be eligible to list on the ITP, in case the company, its promoter, director, group company does not appear in the defaulters list of Reserve Bank and there is no winding up petition against the firm.
Among other conditions, the company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction (BIFR) within a period of five years prior to the date of application for listing. Besides, no regulatory action has been taken against the company seeking to list on ITP , its promoter or director, by Sebi, RBI, Insurance Regulatory and Development Authority (IRDA)or Corporate Affairs Ministry within five years prior to the date of application for listing,
“The company has atleast one full year’s audited financial statements, for the immediately preceding financial year at the time of making listing application,” Sebi said.
Sebi also said that a SME seeking to list on ITP needs to fulfil any of the six criteria including a minimum investment of Rs 50 lakh in its equity shares by at least one alternative investment fund, venture capital fund or other category of investors as approved by the regulator.
An investment of atleast Rs 50 lakh by a Qualified institutional buyer (QIB) or a merchant banker in the equity shares of the SME with a lock-in period of three years from the date of listing. Besides, a specialised international multilateral agency or domestic agency or a public financial institution has invested in the equity capital of the SME.
Mumbai : Market regulator Sebi has notified new norms for listing of start-ups and small and medium enterprises on stock exchanges without having to make initial public offer (IPO). The Securities and Exchange Board of India (Sebi) has made amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO.
Lack of exit opportunities for existing investors and restricted access to new investors is a major problem faced by start-ups and SMEs.
In a circular dated October 8, Sebi said that the minimum amount for trading or investment on the ITP would be Rs 10 lakh.
The move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities.
Besides, the move would provide better visibility, wider investor base and greater fund raising capabilities to such companies.
Sebi said the company would not make an IPO while its specified securities are listed on ITP but can raise capital through private placement or rights issue “without an option for renunciation of rights.”
According to Sebi, a SME will be eligible to list on the ITP, in case the company, its promoter, director, group company does not appear in the defaulters list of Reserve Bank and there is no winding up petition against the firm.
Among other conditions, the company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction (BIFR) within a period of five years prior to the date of application for listing. Besides, no regulatory action has been taken against the company seeking to list on ITP , its promoter or director, by Sebi, RBI, Insurance Regulatory and Development Authority (IRDA)or Corporate Affairs Ministry within five years prior to the date of application for listing,
“The company has atleast one full year’s audited financial statements, for the immediately preceding financial year at the time of making listing application,” Sebi said.
Sebi also said that a SME seeking to list on ITP needs to fulfil any of the six criteria including a minimum investment of Rs 50 lakh in its equity shares by at least one alternative investment fund, venture capital fund or other category of investors as approved by the regulator.
An investment of atleast Rs 50 lakh by a Qualified institutional buyer (QIB) or a merchant banker in the equity shares of the SME with a lock-in period of three years from the date of listing. Besides, a specialised international multilateral agency or domestic agency or a public financial institution has invested in the equity capital of the SME.
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