Indian regulator opens up new channel for SME exits

Start-ups and SMEs will be able to list on an Institutional Trading platform (ITP), without first going through a full IPO process. They can raise capital through private placements. Only "informed investors," such as angel investors and PE and VC firms, will be cleared to buy takes in such companies.

The minimum amount for trading or investment will be INR1 million. Standardized norms of entry for companies, eligibility criteria, disclosure requirements and corporate governance norms have yet to be prescribed for the ITP.

The ITP measures were decided by SEBI at a board meeting on Tuesday.

Other key decisions include bringing angel funds under the AIF program, where they will be classified as venture capital funds (VCFs). To qualify, funds should have a corpus of at least INR100 million, as opposed to INR 200 million for other AIFs. The minimum commitment by an investor into such a fund will be INR2.5 million, compared to INR10 million for other AIFs.

With regard to buy-backs, SEBI increased the mandatory minimum buy-back from 25% to 50% of the amount earmarked, failing which a maximum of 2.5% of the total amount in the escrow account would be forfeited. The maximum buy-back period has been reduced to six months from 12 months.

Companies can buy-back 15% or more of capital only by way of tender offer. They cannot not make another buy-back offer within one year from the date of closure of the preceding offer.

As per the SEBI ruling, the promoters of a company shall not execute any transaction, either on-market or off-market, during the buy-back period.

The regulator also accepted the Chandrasekhar committee's report on simplifying foreign investment rules, which called for creating a single class of investor known as the foreign portfolio investor to replace foreign institutional investors (FIIs), sub accounts and qualified foreign investors.

With regards to the preferential issue of shares, these shares cannot be transferred till trading approval is granted for such shares by the stock exchanges. Further, the lock-in period shall commence on the date of such trading approval.

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• Topics
• South Asia
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• India
• SEBI
• regulation