Mumbai, 23 June
In what could be good news for about 3,000 start- ups in the country, the Securities and Exchange Board of India ( Sebi) eased the framework for such companies to raise capital from the stock market.
The regulator laid a framework for listing such companies on a separate platform. It said they didn’t have to specify the exact enduse of such funds and resort to traditional metrics to justify the price at which they were selling shares. Sebi also instituted a way for migration of these entities from the smaller platform to the main board.
Some of the relaxed requirements include reducing the lock- in period for investors in startups to sixmonths, compared with three years for regular initial public offerings ( IPOs). Disclosure norms for start- ups listing in the alternative trading platform will also be diluted.
“Most of these start- ups were thinking of listing outside India. We have made a very special provision for them now,” Sebi Chairman U K Sinha said at a press conference, announcing the decisions taken at a board meeting of the regulator. He added Sebi had held discussions with start- ups and taken on board all the requirements listed by them.
“The start- up listing requirements have been brought as close as possible to the international process. This should encourage a lot of companies and investors,” said Sanjay Sharma, managing director ( equity capital markets),
Deutsche Equities. Turn to Page 18 >
Sebi Chairman U K Sinha at a press conference in
Mumbai . PHOTO: KAMLESH PEDNEKAR
THE SMART INVESTOR, P14 Sebi halves IPO timeline to six days
Sebi halved the time required between listing and closing of an IPO to six days. Currently, the IPO timeline is trade ( T)+ 12 ( T is the last day of the issue). For all public issues after January 1, 2016, this will be reduced to T+ 6. Sebi said the move would help “ reduce the costs involved with a public issue of equity shares and convertibles” and “ increase the reach of retail investors”.
ANNOUNCEMENTS IPO listing
|Issue completion will be reduced from 12 days after the transaction to 6days
Quicker stake sale by listed companies
|M- cap requirement for companies to use fast- track FPOs and rights issues set at ₹ 1,000 crore and ₹ 250 crore, respectively
OFS process tweaked
|Steps for greater retail participation in OFS
Reclassification of promoters
|Regulator has provided proper framework to address the issue
Sebi- FMC merger
|Board deliberates on operational issues in merger with the commodities regulator
Easier disclosures to help companies raise equity capital; ticket size set at ₹ 10 lakh
Sebi halves IPO timeline to 6 days
Tweaks OFS framework, fast- track public issue norms to boost primary market
Mumbai, 23 June
Capital market regulator Securities and Exchange Board of India ( Sebi) halved the time required between listing and closing of an initial public offering (IPO) to six days.
Currently, the IPO timeline is trade ( T)+ 12 ( where T is the last day of the issue), which will be reduced to T+ 6 for all public issues coming after . Sebi said the move would help “ reduce the costs involved with a public issue of equity shares and convertibles” and “ increase the reach of retail investors”.
For reducing the timeline, Sebi has made the Application Supported by Blocked Amount (ASBA) route, where money stays in the account of the investor until the allocation takes place, compulsory for retail investors. At present, ASBA is compulsory for the two non- retail categories of an IPO.
As some banks in smaller centres were not equipped to deal with ASBA, Sebi has not yet made the system compulsory for the entire market. The market regulator in a release said almost 99.5 per cent of applications in public issues are now received by way of ASBA and that the six- month window for making ASBA compulsory is to “ help intermediaries and banks modify their existing systems and train their staff”.
“Removal of ASBA will do away with all the clutter of cheque clearances and save time. Also, the reduction in timeline will reduce the market uncertainty and provide comfort to a lot of investors,” said Sanjay Sharma, managing director- equity capital markets at Deutsche Equities.
Added Gesu Kaushal, executive director, Kotak Investment Banking,” As companies will be able to list within aweek, it will reduce the investor’s exposure to market uncertainty. In volatile times like today, market sentiment change a lot in two weeks." Among other announcements pertaining to the primary market, Sebi has expanded the “fast- track” route for follow on offers and rights issue to a bigger setup of companies by reducing the qualification criteria.
Sebi has said the minimum public float for fast- track IPOs stands reduced from ₹ 3,000 crore to ₹ 1,000 crore. Meanwhile, companies with public shareholding worth at least ₹ 250 crore will be able to come out with rights issue under the fast track route, under which the approval process is less stringent allowing companies quick access to the market. Sebi has also tweaked the offer for sale ( OFS) framework. While retaining the T- 2 ( where Tis the day of the OFS) practice for announcing the share sale, Sebi has said the announcement can be made two days from banking days and not trading days. The move will allow an issuer to announce an OFS and conduct the share sale as is a banking day.
Sebi has also asked exchanges to allow retail investors to place bids at “ cut off price” as a default option in addition to placing price bids.
The market regulator has also approved the long overdue framework for reclassification of promoters and as non- promoters.
Sebi has said an outgoing promoter will have to step down from any key management position in the company within three years. Also, the outgoing promoter will not be allowed to hold more than 10 per cent shares of the company. Sebi has said existing promoters will be allowed to be re- classified as public in case the company becomes professionally managed and does not have any identifiable promoter. For a company to be categorised as “ identifiable promoter” company, it shouldn’t have a person or a group holding shares of more than one per cent.
Recently, the founder promoters of Infosys Technologies had applied to Sebi to reclassify them as ordinary shareholders.
On start- up listings
We have had rounds of intensive discussions with startups and have taken on board all their requirements. As all the suggestions have been accepted, I hope this market will become reasonably vibrant. There will be an offer document involved in a start- up IPO but the disclosure requirements have been substantially diluted.
On allowing non- tech companies
Whether to allow non- technology start- ups on the new platform was a discussion point at Sebi. We have decided that for tech start- ups a minimum pre- IPO institutional investor shareholding of 25% is required. For other companies, the institutional shareholding will be 50% to qualify for listing.
Work is underway on crowdfunding regulations. Crowdfunding is for very small and early- stage companies, which immediately may not be prepared for listing. We might decide very soon on crowdfunding regulations too.
On Narayana Murthy panel
The proposal on start- ups, which the board has approved , was discussed with the Narayana Murthy panel also.
On further reducing IPO timeline
Once we are comfortable that the system is working well with T+ 6, our attempt will be to go further down.
On e- IPO
For a variety of reasons, we have retained the possibility of paper- based applications. We have not done away with them. The main idea behind e- IPO was to reduce the listing period. That has been achieved on Tuesday. When the systems are more ready, we will go for full e- IPO.
On applicability of FMC norms
We are reviewing each and every circular and guideline issued by the FMC. We are going to have our own rules and regulations, which will be ready in . Whatever be the Sebi guidelines, for example, in the area of exchange shareholding, the same should apply there. But we will not like to do it in a disruptive manner. It means, we will provide reasonable time for entities to migrate.
On bourses foray into new segments
Under the current law, any exchange wanting to start a new segment needs prior Sebi approval. An exchange cannot start a new segment like currency or equity automatically. Before Sebi gives its approval, it checks the exchange’s preparedness, risk managements systems and other processes.
Some of the personnel at FMC is of very good quality. The law passed by the parliament says that FMC staff will be eligible for an induction in Sebi or else they will go back to the government of India. So no one will have any difficulty so far as their job prospects are concerned. SINHA SPEAKS
Market regulator Securities and Exchange Board of India ( Sebi) made key announcements on number of areas, including start- up listings, e- IPOs and its merger with commodity market regulator Forward Markets Commission.
Addressing the media after the board meeting, U K SINHA,
chairman, Sebi said the new listing platform should encourage domestic companies to list in India and help create a vibrant market. Edited excerpts:
“Removal of ASBA will do away with all the clutter of cheque clearances and save time. Also, the reduction in timeline will reduce the market uncertainty and provide comfort to a lot of investors”
Managing director- equity capital markets at Deutsche Equities
“As companies will be able to list within a week, it will reduce the investor’s exposure to market uncertainty. In volatile times like today, market sentiment changes a lot in two weeks”
Executive director, Kotak Investment Banking INDUSTRY VOICES