Sebi relaxes listing, fund-raising norms for start-ups

Under the new norms, 75 per cent shares can be reserved for institutional investors

In a major boost for start-ups, capital markets regulator Securities and Exchange Board of India on Tuesday relaxed its regulations for them to list and raise funds through a dedicated platform on domestic stock exchanges, rather than going overseas.

Under the new norms approved by Sebi's board on Tuesday, the stock exchanges would have a separate institutional trading platform for listing of start-ups from the new age sectors, including e-commerce firms, while the minimum investment requirement would be Rs 10 lakh (Rs 1 million).

For their listing, Sebi has relaxed the mandatory lock-in period for the promoters and other pre-listing investors to six months, as against three years for other companies.

Besides, the disclosure requirements for these companies have also been relaxed, Sebi chairman U K Sinha told reporters after the board meeting.

At least 25 per cent of their pre-issue capital would need to be with institutional investors for technology start-ups, while this requirement would be 50 per cent for companies from other areas.

Sinha said, "Indian start-up space is very vibrant and the country is ranked number five as far as start-ups are concerned. More than 3,100 start-ups are there in the country and a large number of M&As have also happened."

"However, most of these start-ups were thinking of listing outside... We have made a very special provision for start-ups," he added.

Under the new norms, 75 per cent shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors.

For non-institutional categories, it will be on proportional basis.

Sebi has also provided for reclassification of promoters as public investors provided they let go all their special rights, including voting powers, and do not own more than 10 per cent stake.

However, an outgoing promoter can serve as a CEO or hold other senior positions for up to three years if the same is approved by the company's board.