Monday, 13 July 2015

SEBI EXTENDING ITP TO START-UPS

Many new startups and technology companies play a major role in nation building and have a great potential in generating income as well as innovation. These companies for want of a better price discovery and the relaxed regulatory regime often plan to get listed in Singapore or the US. For removing this problem and for creating a more appealing environment for Indian entrepreneurs to list their securities in India, SEBI has through its press release proposed simplified framework for capital raising by technological start-ups and other companies. The highlights of the proposals are as follows:


a.    Listing to be done on the Institutional Trading Platform (ITP).

b.   Following types of companies covered:

·         companies which are intensive in their use of technology, IP, data analytics with substantial value addition and who have at least 25% of the pre-issue capital being held by QIBs[1], or
·         any other company in which at least 50% of the pre-issue capital is held by QIBs.

c.    No person (individually or collectively with persons acting in concert) in such a company shall hold 25% or more of the post-issue share capital.

d.   Considering the nature of business of companies which may list on ITP, disclosure may contain only broad objects of the issue and there shall be no cap on amount raised for General Corporate Purposes.

e.    Further, the lock in of the entire pre-issue capital shall be for a period of 6 months from the date of allotment uniformly for all shareholders.

f.     As the standard valuation parameters such as P/E, EPS, etc. may not be relevant in case of many of the subject companies, the basis of issue price may include other disclosures, except projections, as deemed fit by the issuers.

g.    Companies intending to list on the ITP, shall be required to file draft offer document with SEBI for observations, as provided in SEBI (ICDR) Regulations, 2009.

h.   Only following categories of investors shall be permitted

·         QIB;
·         family trusts;
·         systematically important NBFCs registered with RBI; and
·         intermediaries registered with SEBI, all with net-worth of more than Rs. 500 crore and
·         Non-Institutional Investors (NIIs) other than retail

i.     Allocation between QIB and NII shall be in the ratio of 75% (discretionary) and 25% (proportionate), respectively.

j.     QIB's allotment shall be limited to 10% of the issue size and shall be subject to a lock in of 30 days at present.

k.   Minimum application  - Rs. 10 lakhs

l.     Minimum trading lot  - Rs. 10 lakhs.

m.  Minimum number of allottees 200

For Category I and II AIFs, which are required under the SEBI (Alternative Investment Funds) Regulations, 2012 to invest a certain minimum amount in unlisted securities, investment in shares of companies listed on this platform may be treated as investment in 'unlisted securities' for the purpose of calculation of the investment limits.


[1] as defined in SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

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