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SEBI constitutes Group to facilitate the stock market listing of startups

Jun 13, 2018 11:41 IST
SEBI constitutes Group to facilitate the stock market listing of startups

Market regulator Securities and Exchange Board of India (SEBI) on June 12, 2018 constituted a Group to review Institutional Trading Platform (ITP) Framework to make stock market listing attractive for startups.

The group will submit the report to SEBI within a period of one month that is by July 2018.

Terms of Reference of the Group

• To look into the existing Institutional Trading Platform (ITP) framework and suggest measures to facilitate listing of startups.

• To revisit the current ITP framework and identify the areas, if any, which require further changes.

• To address issues relevant to ITP which the group may like to assess.

Members of the group

The members of the group include representatives from:

• Indian Software Product Industry Round Table (iSPIRT)

• The Indus Entrepreneurs (TIE)

• Indian Private Equity and Venture Capital Association (IVCA)

• Law firms

• Merchant bankers

• Stock exchanges

Background
SEBI had put in place the ITP framework in 2015 with a view to facilitate listing of new age companies in sectors like e-commerce, data analytics, bio-technology and other startups.

However, this framework failed to gain any traction.

SEBI already working on ways to bolster startups

The markets regulator has already been working on ways to help boost startups.

In March 2018, SEBI board approved doubling of investment limit by angel funds in venture capital undertakings to Rs 10 crore, a move to provide an impetus to early-stage startups.

Angel funds, a sub-category of Alternative Investment Funds (AIFs), encourage entrepreneurship by financing small startups at a stage when they find it difficult to obtain capital from banks and financial institutions.

 Institutional Trading Platform Framework

What is Institutional Trading Platform Framework?

Introduced in 2013, the platform allows companies to list without necessarily doing an Initial Public Offer of equity.

It is a window on stock exchanges where e-commerce, data analytics, bio-technology and other startups can list and trade on their shares.

Why was the framework brought up by SEBI?

To encourage start-ups to list here, SEBI introduced the ITP Framework. The regulator relaxed many of the more stringent rules governing Initial Public Offerings (IPOs). On the ITP, promoters’ capital is locked in only for six months, against the three year lock-in for normal IPOs.

The company that lists on the ITP will be given an option to migrate to the main board after three years.

Financial Criteria for a company to get listed on ITP:

  • The paid up capital of the company has not exceeded 25 crore rupees in any of the previous financial years.
  • The company has at least one full year’s audited financial statements at the time of making listing application.
  • The company has not completed a period of more than 10 years after incorporation and its revenues have not exceeded Rs 100 crore in any of the previous financial years.

Benefits of listing on ITP:

  • Facilitates capital raising by small and medium enterprises including start-up companies which are in their early stages of growth
  • Provides easier entry and exit options for informed investors like angel investors
  • Provides wider investor base
  • Relaxed compliance and cost effective listing
  • Tax benefits to long term Investors
 

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