The Securities and Exchange Board of India (SEBI) on Friday approved the framework for enabling technology-oriented startups and new-age companies to list on the exchanges.
Under the new framework, the capital markets regulator has permitted sophisticated investors to participate in the offerings and trading of startups on the Innovators Growth Platform (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’ or AI.
Such investors can get accreditation by applying to the stock exchanges and depositories. AIs possessing demat accounts and deemed eligible will be allowed to participate on the revamped IGP for three years.
AIs are investors who can hold pre-issue capital not exceeding 10%. These investors can be individuals with a total gross income of Rs 50 lakh per annum and minimum liquid net worth of Rs 5 crore, or a corporate body with a net worth of Rs 25 crore or above.
Many Indian tech-enabled and e-commerce firms such as Flipkart, Paytm and InMobi have availed of 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 common or retail investors.
SEBI will soon release the detailed guidelines for the IGP platform.
The regulator had given an ‘in-principle’ approval to facilitate listing of startups on its revamped platform at its previous board meeting in December.
SEBI had proposed to rename the platform to Innovators Growth Platform (IGP) 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. However, it had failed to generate any market interest.
The decision to approve the new framework was announced after the capital markets regulator’s board meeting which took place in New Delhi. Union finance minister Arun Jaitley addressed the SEBI board and top ministry officials after the meeting.