The Securities and Exchange Board of India (SEBI) has proposed norms for technology startups and new-age companies that are listed on the Innovators Growth Platform (IGP) to trade on the main board of stock exchanges.
According to a consultation paper floated by SEBI on Tuesday, a company should be listed on an IGP platform for at least one year and have at least 200 shareholders for it to be eligible to trade on the main board.
SEBI’s proposed norms are labelled under three broad categories that focus on minimum promoter capital in the company, their lock-in period on share capital, and promoters’ track record as other eligibility criteria for such companies to trade on the main board.
Promoters should contribute at least 20% of the total share capital. Such capital, including contribution made by alternative investment funds (AIFs), foreign venture capital investors or any other public institution including banks, shall have a lock-in period of three years from the date on which trading approval is granted.
Any contribution to capital exceeding the 20% threshold shall be locked-in for one year, SEBI said.
SEBI has sought public comments on the proposed norms till 10 June.
The market regulator had given an in-principle approval to list new-age companies on the exchanges at its December board meeting, whereby it facilitated firms to list on the revamped IGP platform – renamed from its earlier avatar of Institutional Trading Platform (ITP).
The ITP was a window on the stock exchanges where e-commerce, data analytics, bio-technology and other startups could list and offer their shares for trading.
In March this year, SEBI permitted sophisticated investors to participate in the offerings and trading of startups on the IGP.
Besides investors with the backing of family trusts having a net worth of at least Rs 500 crore and well-regulated foreign investors, SEBI created a new class of 'accredited investors’. Such investors can get accreditation by applying to the stock exchanges and depositories.
Many Indian tech-enabled and e-commerce firms such as Flipkart, Paytm and InMobi have raised multiple rounds of funding from private equity and venture capital investors. However, they have stayed away from the public markets for various reasons including the valuation gap between what a company expects and the market’s willingness to pay for it, and lack of understanding about the business models of such companies by retail investors.
