India proposes regulatory changes to boost start-up listings

The changes will affect the Institutional Trading Platform (ITP), which SEBI introduced in 2013 to allow start-ups and small and medium-sized enterprises in the sectors of technology, information technology, intellectual property, data analytics, or biotechnology to list without going through a full IPO process.

Companies listed on ITP can raise capital through private placements, with only certain participants, such as angel investors and PE and VC firms, allowed to invest in these rounds. ITP is intended to provide a path to a public listing, with companies having the option to migrate to a recognized stock exchange after three years. However, the platform has struggled to gain a foothold so far and no companies have listed via this route.

SEBI has proposed to change the name of the platform to Innovators Growth Platform (IGP), and to update several aspects, such as eligibility. Currently, a company in the targeted sectors may list on ITP if, on the date of filing its application, at least 25% of its pre-issue capital is held by qualified institutional buyers – a category that includes domestic and foreign PE and VC funds, along with several other types of financial investors. For companies outside the targeted sectors, the requirement rises to 50%.

SEBI wants to alter the criteria so that companies with certain high net worth individuals (HNIs) and foreign investors would also be eligible for listing. Businesses in which these investors have held 25% or more of the pre-issue capital for at least two years prior to the application date (with HNIs making up no more than 10%) could list, regardless of sector.

Existing regulations also limit any shareholder, either alone or as part of a consortium, to hold no more than 25% of post-issue capital in an ITP-listed company. SEBI’s proposal would remove this limit, along with designating IGP as the main board platform for start-ups and giving companies the option to trade under the regular category after being listed on IGP for one year.

The proposals are subject to public comment until November 16.

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• Topics
• South Asia
• Regulation
• IPO
• India
• SEBI