Start-ups get a funding boost: Sebi sets easier IPO norms, halves listing time to six days

The Securities and Exchange Board of India board on Tuesday took a slew of decisions that would encourage new technology start-ups to list on the domestic bourses rather than go overseas to raise funds.

The Sebi said it plans to set up an Institutional Trading Platform for listing these companies, halved the listing time to six days from the date of the public offer and also did away with the need to issue cheques.

The Sebi said the ITP will be open to a broad range of technology companies, throwing the alternative listing platform for a larger number of firms to tap the “fast-track” route for raising funds.

The new rules, which were widely expected, are aimed at luring startups that may have considered an overseas listing, given India has stringent requirements for regular IPOs. About 3,100 startups in India have raised $7.2 billion in venture capital and private equity funding since 2013 — most of it going to technology companies, according to Thomson Reuters data.

Currently, the companies are required to list their shares on the stock exchanges within 12 days of the last date of the IPO (Initial Public Offer) process, thus keeping the funds locked in for a longer period of time.

The shorter time period, which would come into effect from 1 January 2016, would also help reduce the costs associated with the public offering, Sebi chairman UK Sinha said after a meeting of the regulator’s board.

However, investors will have to wait for making the IPO process entirely online in terms of submission of their bids.

While Sebi has provided for online submission of bids from terminals of market entities, the same from any computer or mobile will take some time.

The Sebi board also decided to allow a larger number of companies to raise funds through a ‘fast-track’ process.

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.

Sebi also said that ASBA (Application Supported by Blocked Amount), which refers to an application mechanism for subscribing to IPO with the bid amount blocked in a bank account rather than that being debited, will be applicable to all kinds of investor categories and all IPOs.

Sinha said that the number of bank branches with ASBA facility has increased to 95,500 now, from 9,800 when this facility was introduced.

“Now all applications can be be ASBA supported and investors would not suffer any loss of interest, while refund of money would not be a problem,” Sinha said.

He also said that the Sebi board has decided that depository participants and registrars can also receive IPO applications.

“In order to help the intermediaries and the system prepare for it, it will be applicable from January 1, 2016. Any IPO ready for subscription as on that date would be through the new mechanism,” Sinha said.

Agencies