SEBI had taken some key decisions in its board meeting held in June 2015, wherein one of the key decision was introduction of new platform for raising of capital by startups. Now SEBI has notified rules for listing of startups on Institution Trading platforms (‘ITP’) making it easier for such companies to raise capital. Such a bold move could change the landscape of the country’s equity capital markets. Consequently, SEBI has also made certain other changes due to introduction of Institutional Trading Platform.
The Key changes are given hereunder:
1) Eligibility of entities for listing on ITP: Following entities are eligible for listing on ITP:
- Entities which are intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition. 25% of pre-issue capital of such entities should be held by qualified institutional buyer(s) as on the date of filing of draft information document or draft offer document with the Board, as the case may be; or
- Any other entity in which at least 50% of the pre-issue capital is held by QIBs as on the date of filing of draft information document or draft offer document with the Board, as the case may be.
The norms further provides that no person, individually or collectively with person acting in concert shall hold 25% or more of the post-issue share capital in the start ups.
2) Listing of securities on ITP without public issue: The entity shall obtain in-principle approval from the recognised stock exchanges on which it proposes to get its securities listed. It should list its specified securities on the recognised stock exchange(s) within thirty days from the date of issuance of observation by the Board. Norms of SEBI relating to allotment, opening and closing of issue, advertisement, underwriting, etc., shall not be applicable on such entities.
3) Easier exit for entities listed on ITP without making a public issue: Entity whose securities are listed on the ITP platform may exit from such platform if:
- Its shareholders approve such exit by passing a special resolution via postal ballot where 90 % of the total votes and the majority of non-promoter votes should be in favor of such move; and
- Recognised stock exchange approves of such exist.
4) Listing of securities on ITP pursuant to public issue: For such listing of securities SEBI has kept the size of minimum trading lot and minimum application amount as Rs. 10 lakhs. The number of allottees in such case shall be more than 200. The allocation in the net offer to public category shall be 75% for institutional investor and 25% for non-institutional investor.
5) Lock in: The entire pre-issue capital of the shareholders shall be locked-in for a period of 6 months. In case of listing pursuant to public issue such period of 6 months will be counted from the date of allotment of securities. However, in case listing without public issue such period will be counted from date of listing of securities.
6) Migration to main board: The start-ups listed on the institutional trading platform can migrate to the main board after expiry of three years by meeting certain guidelines.
7) Other provisions: In order to reduce the timeline of public issue process, SEBI has mandated that acceptance of bids shall be made only by using Application Supported by Blocked Amount (‘ASBA’). In order to reduce the burden on compliance on start ups, SEBI also provides exemption to startups (listed on ITP without making public issue) from delisting norms and Take over code.