SEBI Relaxes Listing Norms for Startups to Go Public

The Securities and Exchange Board of India (SEBI) relaxed the norms on eligibility and listing criteria on the Innovators Growth Platform (IGP). The IGP is a separate exchange venue for startups. The objective behind providing relaxation in these norms is to make the IGP more accessible to companies, given the evolving startup ecosystem.

If a company wants to list on IGP, it needs to have 25% of pre-issue capital held by eligible investors for two years. The SEBI eased this regulation and provided that these investors can hold pre-issue capital for one year before listing.

The SEBI renamed the ‘Accredited Investors’ as ‘Innovators Growth Platform Investors’. The pre-issue shareholding of such investors for meeting eligibility was considered for only 10%. In contrast, now it is increased, and the entire 25% will be considered for meeting eligibility norms.  

The issuer company cannot make discretionary allotment as per the present norms. The SEBI eased this norm and allowed the issuer company to make discretionary allotment up to 60% of the issue with a lock-in period of 30 days on such shares. These new norms also allow the companies that have issued Superior Voting Rights (SVR) equity shares to the promoters or founders to list under the IGP framework.

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The SEBI has relaxed the stipulation for triggering open offers to companies listed under the IGP platform from 25% to 49%. The SEBI has also eased the delisting norms, allowing companies to delist or mitigate from the IGP platform to the main-board, i.e. NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

The new norms provide that for successful completion of companies’ delisting under the IGP platform, the post-offer promoter or acquirer shareholding, taken together with the tendered and accepted shares, reach 75% of the total issued shares and at least 50% of the public shareholders are tendered and accepted. 

For mitigation from the IGP platform to the main-board, a company that does not satisfy the conditions of probability, net worth, net assets, etc., needs to have 75% of its capital held by Qualified Institutional Buyers (QIBs) on the date of mitigation. However, they have been relaxed now, and there is a reduction in the requirement from 75% to 50%. 

The IGP aims at providing technology-oriented companies, or startups with early-stage investors, an opportunity for listing within a simple framework compared to the main-board. At present, the platform does not have any listing. There is an expectation that the startups will go for listing on the IGP platform due to relaxation in norms for listing. 

The new norms by the SEBI make it easy for the startups to go for listing and raise funds. In recent months, several domestic startups have opted to list in the U.S. and Singapore markets because of their friendlier listing norms and multiple listing options. The relaxations provided in listing regulations by the SEBI will encourage domestic startups and companies to go for listing in domestic markets instead of foreign markets.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in.