Capital market regulator SEBI has come out with relaxed norms to promote the listing of digital economy companies. Group of measures related to listing and fund raising were made by SEBI that may make it easy for India’s start up sector to list in India rather than going to the overseas markets.
An important component of the new relaxed regulation is launching of separate institutional trading platforms for start ups. To complement the new platform, SEBI has announced many flexible norms including lightened disclosure and fund disposal criteria for stratus to mobilise funds from the capital market.
The flexible norms include important change in disclosure norms related to fund usage. Similarly, the concept of promoter is also made lightened to consider the dynamic environments of the start up sector. Lock in requirements for the start-up sector is also relaxed.
In the case of allocation of shares, 75% of shares can be reserved for institutional investors.
So far, the start up sector including the fast growing ecommerce firms were planning to migrate to offshore markets like the US and Europe to make their IPOs. The problem is not unique to India and the Chinese ecommerce giant- Alibaba has made its IPO in the NYSE last year.
According to UK Sinha, Chairman of SEBI, “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 merger and acquisitions have also happened.”
SEBI’s existing norms are not suitable for digital companies and other start ups who have little inventories, investment in plant and machineries. Similarly, they have also big difference in valuations compared to conventional firms from manufacturing and services.
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