New Delhi, June 24 (KNN)The Securities and Exchange Board of India (Sebi) board is meeting on Thursday to discuss the long pending issue of listing of SMEs, start-up companies without initial public offer (IPO). 

In this year’s Budget, Finance Minister P Chidambaram had said SMEs, including start-ups, will be permitted to list on SME exchanges without being required to make an IPO, but the issue will be restricted to informed investors.

He had also said that this would be in addition to the existing SME platforms which BSE and NSE had launched in which listing can be done through an IPO and with wider investor participation. Under the existing platforms, small companies can go public without filing with the SEBI.

However, the companies keen on getting listed without IPO would need to have prior investments by entities like venture capital funds, merchant banks, domestic or global multi-lateral lending agencies and other institutional investors.

The proposed listing is expected to help SMEs and start- ups access capital easily and will also ease the risks associated with these securities for the investors.

Only those companies which have been operating for 10 years or less and have revenues of more than Rs 100 crore or paid up capital over Rs 25 crore may be allowed to list by the market regulator.

Meanwhile, Sebi is also planning to relax the minimum 25 per cent public shareholding requirement for the SME’s and start-ups on the proposed platform, as most promoters would not like to dilute their stake at an early stage of their company’s life cycle.

However, the requirement to launch an IPO and other listing norms would apply on a firm desirous of shifting to the main trading platform or the existing SME exchange.
The SMEs and start-ups on the proposed segment might only be allowed to raise capital after their listing and through private placements.

The regulator may also consider placing the promoter’s stake under a three year lock-in, as practised in the main market and the existing SME platform.

Moreover, a company might be asked to compulsorily exit the platform if its worth crosses Rs 25 crore or if it has been listed for over 10 years on the segment, according to a media report.

The proposed listing of SMEs and start-ups without the requirement of an IPO was announced by Finance Minister P Chidambaram in the budget earlier this year.    

Earlier, according to a media report SEBI Executive Director S Ramann had also said the proposed platform can be part of SME exchanges in which informed investors can put their money into these entities.

He has also said that as there were chances of SME companies facing winding up for which the interests of retail investors have to be protected.

Thus, the SMEs and start-up companies looking to get listed through this route would require a clean track record in terms of their borrowings, corporate governance and disclosure norms, as reported in media.

Referring to financing of SMEs, Ramann had also said that the bank funding remained the predominant source of financing for the sector, adding that they have to look for innovative sources of financing to attract capital. (KNN)