SEBI wants to make startup listing easier, proposes new norms

SEBI has invited public comments on its website before November 16, after which the proposal would be cleared.

In a bid to attract more startups to the bourses, market regulator SEBI has proposed a relaxation of listing norms.

First, SEBI has proposed the renaming of Institutional Trading Platform (ITP) to Innovators Growth Platform (IGP), and has also announced that IGP would be the main platform under which startups can list themselves.

Second, startups can now trade under the regular category within a year of their listing. Earlier, they were mandated to complete three years under IGP before making it to the regular category. SEBI has also proposed a reduction in the minimum trading lot size to Rs 2 lakh from the existing Rs 10 lakh.

Additionally, it has called for a lock-in of six months for all categories of pre-IPO public shareholders, including PE funds (which were excluded earlier). The minimum number of allottees has been brought down as well to 50 from the existing 200.

In a discussion paper released on its website, SEBI stated,

“Lately, 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.”

It further stated,

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

The existing ITP network dates back to August 2015 when it was framed in lieu of growth in the startup ecosystem in India. However, strong entry barriers to listing prevented a a host of startups from going public.

In July 2018, SEBI put in place a team to review the ITP platform. Executives from TiE, iSPIRT, Indian Private Equity and Venture Capital Association (IVCA), banks and law firms got into a huddle to make amendments to the norms, and make listing simpler.

SEBI has invited public comments on its website before November 16, after which it would be finalising new norms.