Sebi allows start-ups, SMEs to list on markets without IPO
Updated: Jun 26, 2013 01:10:59pm
New Delhi, Jun 26 (KNN) Market regulator Securities and Exchange Board of India (Sebi) has allowed start-ups and small and medium enterprises to be listed on the market without making an initial public offering (IPO).
“With a view to provide easier exit options for informed investors like Angel Investors, VCFs and PE etc. to provide better visibility, wider investor base and greater fund raising capabilities to such companies, the Board approved the proposal to amend the SEBI (ICDR) Regulations to permit listing of Start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO,” Sebi said in an official statement.
Lack of exit opportunities for the existing investors and restricted access to new investors have always posed problems for start-ups and SMEs, according to Sebi.
Meanwhile, new rules have been introduced for the angel investors to ensure genuine investments.
According to the new rule, angel investors would be allowed to put in their money in only firms incorporated in India and that are not more than three years old.
The decision came after the Sebi board met yesterday to discuss various issues.
The minimum amount for trading or investment on the ITP will be Rs 10 lakh. Such companies would also be exempted from the requirements of having to offer up to 25 per cent of its shareholding to public through an offer document in order to get listed.
"Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they will not be permitted to raise capital, though they can continue to make private placements," Sebi said.
Listing on ITP by start-ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community.
"Standardised norms of entry for companies, eligibility criteria, continuous disclosure requirements, simplified exit rules and corporate governance norms will be prescribed," Sebi said.
However, the angel funds are required to have an amount of at least Rs 10 crore and minimum investment by an investor should be Rs 25 lakh.
"Further, the continuing interest by sponsor/manager in the angel fund shall be not less than 2.5 per cent of the corpus or Rs 50 lakh, whichever is lesser," Sebi said.
Among others, investment in a company by an angel fund should not be less Rs 50 lakh and not more than Rs 5 crore. Also, this investment should be held for a period of at least three years.
An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies. (KNN)
“With a view to provide easier exit options for informed investors like Angel Investors, VCFs and PE etc. to provide better visibility, wider investor base and greater fund raising capabilities to such companies, the Board approved the proposal to amend the SEBI (ICDR) Regulations to permit listing of Start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO,” Sebi said in an official statement.
Lack of exit opportunities for the existing investors and restricted access to new investors have always posed problems for start-ups and SMEs, according to Sebi.
Meanwhile, new rules have been introduced for the angel investors to ensure genuine investments.
According to the new rule, angel investors would be allowed to put in their money in only firms incorporated in India and that are not more than three years old.
The decision came after the Sebi board met yesterday to discuss various issues.
The minimum amount for trading or investment on the ITP will be Rs 10 lakh. Such companies would also be exempted from the requirements of having to offer up to 25 per cent of its shareholding to public through an offer document in order to get listed.
"Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they will not be permitted to raise capital, though they can continue to make private placements," Sebi said.
Listing on ITP by start-ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community.
"Standardised norms of entry for companies, eligibility criteria, continuous disclosure requirements, simplified exit rules and corporate governance norms will be prescribed," Sebi said.
However, the angel funds are required to have an amount of at least Rs 10 crore and minimum investment by an investor should be Rs 25 lakh.
"Further, the continuing interest by sponsor/manager in the angel fund shall be not less than 2.5 per cent of the corpus or Rs 50 lakh, whichever is lesser," Sebi said.
Among others, investment in a company by an angel fund should not be less Rs 50 lakh and not more than Rs 5 crore. Also, this investment should be held for a period of at least three years.
An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies. (KNN)
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