India's online ventures have given the thumbs up to SEBI's tweaked listing norms for startups. A cross-section of startups believe that SEBI's decisions to cut down on the number of minimum investors while expanding the minimum gardening period before a firm listed on the special trading platform can migrate to the main bourses, will allow innovative business ideas to flourish and create a level playing field for young firms. The move is also being seen as a big propeller for the centre's 'Make in India' campaign.
However, some entrepreneurs feel that the Rs 10,00,000 minimum investment ticket size could be a bottleneck for retail investors in becoming part of the growth story.
In its board meeting on Tuesday, SEBI decided to bring down the minimum investor participation level to 200 investors as against 500 it proposed in the draft norms in March this year. It also prescribed a period of three years after which such startups can move to the main stock exchange platform. Earlier, SEBI had proposed a one-year period for this migration.
SEBI also expanded the business domain of firms who can tap into this platform. It said the platform will be made accessible to companies which are intensive in their use of technology, information technology, intellectual property, data analytics, bio-technology, nano-technology to provide products, services or business platforms with substantial value addition and with at least 25 per cent of the pre-issue capital being held by qualified institutional buyers (QIBs) or any other company in which at least 50 per cent of the pre-issue capital is held by QIBs.
Here’s what some of the hot startups in the country had to say about the tweaked norms:
Azeem Zainulbhai, CFO, Housing.com
“We welcome this move by market regulator SEBI as it will be a major boost for the entire Indian start-up community. This is a reflection that the sheer pace with which start-ups have grown over the past year has attracted attention from key decision makers in the country. By bringing these reforms into action, it will now be easier for innovative business ideas to flourish and enable Indian equity companies to invest in India itself. This move will also encourage new technology start-ups to list on the domestic bourses rather than go overseas to raise funds.”
Navneet Singh, co-founder, PepperTap
"A common retail investor may not contribute in the hyper growth story of the Indian startup landscape. This will create investor wealth and the startups will benefit by raising additional capital. It’s a win-win situation for the firm as well as the shareholders. Startups might start to sprout in India due to the double benefit of - massive target population and financing opportunities, which the relaxation of the released listing guidelines has greatly simplified."
Abhiraj Bhal, co -founder, Urbanclap.com
"The recent SEBI announcement is a welcome step. While still early days, it paves the way for Indian startups to go fully public in domestic markets in the future. This is very important. We are currently in the midst of a consumer internet revolution in India, and the next decade will see a very large wealth creation cycle. Listing in the Indian market will allow Indian retail investors to participate in this wealth creation wave."
Diwakar Chittora, founder & CEO, Intellipaat
“This will give boost to start-up ecosystem. Start-ups and SME's can now list, raise funds without much hassle. This will help start-ups reach high value investors. Start-ups would have easier disclosure requirements and simpler rules for raising capital. This will encourage start-ups entry into equity market.”
Raju Vanapala, founder, LearnSocial
"This is definitely going to encourage companies to list in India in the future. Currently startups don't have any kind of exit ecosystem in the country. This move by SEBI is likely to create an exit ecosystem for both investors and entrepreneurs. The entrepreneurs will be able to draw greater funding from investors. Most start-ups so far were keen on listing in the foreign stock exchanges, given the current restrictions, but with the current move by SEBI, more investors will be willing to invest in India and more startups will also list in the country in the future. A lot of companies may be successful but not profitable until they go for IPO. Regulations in the local market will not allow start-ups to become eligible for an IPO. That is the reason why some start-ups wanted to register in the US. By relaxing these regulations the Government can actually increase the flow of lot of money within the boundaries of the country."
Shiju Radhakrishnan, founder & CEO, iTraveller.com
"It's an important step in the right direction as it will create a level playing for the early stage startups, easing norms for listing will help startups get access to the local money available in plenty rather than be dependent on a handful of institutional investors. It is an encouraging step for domestic investors as they will be able to be part of the startup success story. Compared to that of global markets, India was about a decade trailing in terms of access to capital when it comes to IPO. The revised norms by SEBI might directly help early stage startups like iTraveller in raising funds through IPO's in next 3-4 years once the norms are matured."
Sanjoe Jose, co-founder & CEO, Talview
“This is a great initiative at least in showing the intent of SEBI. I would have preferred to see retail investors also having an opportunity to be part of the growth story, 10 Lakhs limit is a little high. If the government can follow up with change in regulations for easier payment collection, tax sops for retail investors who invest in tech startups like EIS and SEIS tax breaks, it will significantly improve the environment growth stage startups in the country.”
Abhinav Choudhary, co-founder, Smartprix.com
"SEBI's move was the need of the hour in line with "make in India" campaign of the government. It will make it easier for startups to raise funds in India, they don't have to look to offshore markets for funds. Technology sector is booming in India and these changes are going to give more boost to this sector. This will attract a lot of investors towards Indian startups as SEBI relaxed the listing regulations, limitations on usage of funds. Happy to see these institutions working hard with changing times."
Vineet Jain, co-founder & CEO, LoanStreet.in
“It’s a step to encourage companies to list in India as creating an IPO route as a future projection is very possible now. The government of India wants “Ghar Ka Paisa Ghar Mein Hi Rahe.” Indian startups have only HNI s to raise funds from local markets. Big entities like (Soft Bank in Japan) are needed in India as well. Ratan Tata has taken the lead by investing in a lot of consumer internet Businesses. More corporate houses should get into the game and support startups.”
Umang Srivastava, Joint Managing Director, Bonita
“The step taken by SEBI is very encouraging. India today is witnessing a vibrant entrepreneurial culture with a large number of start ups emerging on to the big stage. Unnecessary hassles and restrictions in listing were driving startups to list abroad. The liberalizing of the listing norms and access to an alternative institutional trading platform promises to create a better ecosystem for ventures to list and raise capital in India. It is a win-win situation for both entrepreneurs and investors. The relaxation will not only attract many foreign investors but will also give domestic investors a chance to become a a part of the success story of the start-up revolution. At Bonita, we are currently in talks with several venture capitalists for funding to expand our horizon. We believe that funding norms should be made easier rather than stringent for businesses to flourish. It is businesses that create jobs and contribute to the incomes.