SEBI has advisable decreasing the hold period just before listing from two years to a single year to assist startups attract investors.
Failing to build buzz about startup listing in India, market place regulator Securities and Exchange Board of India (SEBI) is hunting to once more amend current criteria immediately after initial modifications created in 2019. SEBI in a consultation paper titled Review of framework of Innovators Growth Platform (IGP) below SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, has now proposed nine modifications to the IGP framework primarily based on inputs from startups and other market place participants and has sought public comments on the similar by January 11, 2021.
In terms of the eligibility criteria, SEBI has advisable decreasing the hold period just before listing from two years which is perceived as an onerous situation to a single year to assist startups attracting investors who are inclined to an early listing at the time of investing. SEBI stated that this will probably make more startups eligible for IGP listing. The present rule seeks 25 per cent of the pre-challenge capital needed to be held by eligible investors for two years. “However, there may be a lot of churn of the investors as the start-up goes through various phases. Therefore, the 2 year hold period for eligibility to list on IGP may be difficult to meet as eligible investors would want to get regular exits and may get replaced by new investors.”
Another ask by startups was about exemption to option investment fund (AIF)-II category investors from post challenge six-month lock-in supplied shares are held for a period of a single year from the date of buy. Currently, equity shares held by a venture capital fund or AIF-I investors or a foreign VC, and so forth., are exempted from the stipulation. SEBI agreeing to this has advisable in the paper that comparable to the mainboard exactly where the post challenge lock-in specifications are not applicable for AIF-II, supplied that the shares are held for a period of a single year from date of buy, the exemption may possibly be supplied in IGP framework also.
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Other suggestions incorporated enabling the issuer firm to allocate up to 60 per cent of the challenge size on a discretionary basis prior to challenge opening on the lines of the provisions in the mainboard. SEBI also stated that the limit on shareholding of accredited investors (AI) only up to 10 per cent of pre-challenge capital — out of eligibility requirement of minimum 25 per cent to be held by eligible investors – may possibly be removed. Also, AIs’ pre-challenge shareholding may possibly be thought of for the whole 25 per cent of the pre-challenge capital needed for meeting eligibility situation norms.
Among other modifications advisable had been enabling issuer businesses in search of listing below IGP to be permitted to challenge differential voting rights/superior voting rights to promoters or founders. Also, the stipulation of Qualified Institutional Buyers (QIBs) to hold at least 75 per cent of the total issued capital to migrate to the mainboard may possibly be decreased to a lesser threshold of 40 per cent because post listing on IGP “it is a very stringent requirement that 75 per cent of the capital is held with QIBs.” BSE had received SEBI approval in December 2018 to launch the BSE Startups platform. So far seven startups are listed.