Leading e-retailer Snapdeal said that Sebi’s move to relax regulations relating to listing on domestic stock exchanges will benefit “India-focused companies” like itself in the long-run
Mumbai : Ushering in a wave of technology- driven reforms, the Securities and Exchange Board of India allowed startups to list and raise funds with an easier set of norms within India, while it made investments cheque-free for all IPOs.
Besides, the regulator also fast-tracked the process of raising funds for companies through IPOs by reducing the listing time by half to six days after the public offer.
The regulator also allowed a larger number of companies to tap the ‘fast-track’ route for raising funds from the existing and new investors. A company with public shareholding worth Rs 1,000 crore can raise funds through FPOs under fast-track mode, down from Rs 3,000 crore requirement earlier.
For rights issues, the fast-track route can be availed by companies with public shareholding worth as low as Rs 250 crore.
While the move to create a separate institutional trading platform on stock exchanges for start-ups was cheered by e-commerce firms including Snapdeal and other interested players, the market experts also welcomed the reduction in listing time and expansion of ASBA facility for IPO investments that would do away with cheque payments.
ASBA (Application Supported by Blocked Amount) refers to an application mechanism for subscribing to IPO where the bid amount is blocked in a bank account and it would be now applicable to all kinds of investor category across all IPOs.
The new start-up listing norms are aimed at encouraging Indian entrepreneurs and their technology and other ventures to remain within the country, rather than moving to overseas markets for funds, Sebi Chairman U K Sinha said.
The regulator said that the streamlining of public issue norms would “obviate the need to issue cheques”, help more retail investors access IPOs and reduce the costs.
“With this issuers will have faster access to the capital raised and investors will have early liquidity,” Sinha said. Currently, it takes 12 days after the Initial Public Offer (IPO) for a company to list on the exchanges, thus keeping investors’ funds locked in for a longer period. However, investors will have to wait for making the IPO process entirely online in terms of submission of their bids.
Obliges govt on OFS
Partly heeding to the government’s request on Offer For Sale route for PSU disinvestment, Sebi also allowed the companies to disclose such plans two banking days prior to the share sale — a move that may lead to most such share sales taking place on Mondays. Currently, companies are required to give an advance notice two trading days before the OFS, which the government has been saying gives scope for speculators to beat down the share price of the disinvestment-bound PSU.
To prevent misuse of funds raised from public, Sebi said companies will have to keep the money in scheduled commercial banks till the amount is utilised for specified purposes. While Sebi has provided for online submission of bids from terminals of market entities, the same facility from any computer or mobile will take some time. Sinha said the full-fledged e-IPO would be introduced in due course. On the merger of commodities regulator FMC with Sebi, Sinha said it would be completed by September-end.
To bolster corporate governance at listed companies, Sebi also cleared a new set of norms for re-classification of promoters, whereby an outgoing promoter would have to forego control and all special rights and dilute stake to 10 per cent to become a public investor.
Experts welcome measures
Welcoming the new norms, BSE Managing Director Ashish Chauhan said the new platform will ensure that the Indian start-ups prefer to list on domestic exchanges instead of going to foreign exchanges. Leading e-commerce firm Snapdeal said it is a welcome move and provides the “much-needed access to funds”. NSE’s Chief Regulatory Officer V Narasimhan said: “The reduction in IPO time is a very good example of positive exploitation of banking and trading technology for common good. Primarily market investors will definitely welcome this move.”
According to reports, Snapdeal was looking at American bourses for listing. In 2013, Snapdeal co-founder and chief executive officer Kunal Bahl had talked of US listing without disclosing any deadline.
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Major revamp
l Lowers minimum market cap for fast-track FPO, rights issue
l Makes it mandatory for a stock to get listed within 7 days of the closing date of a public offering, down from 12 days earlier
l All investors lock-in period in start-up IPOs is 6 months
l Start-up cos can list if 25% pre-IPO capital via QIP
l Refuting Pakistan Foreign Minister Shah Mehmood Qureshi’s
l Start-up cos minimum investment 1 mln rupees
l Non-IT start-up cos IPO non-institutional investor quota 50%
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