SEBI constitutes Group to facilitate the stock market listing of startups

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.

 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