India to create trading platform for technology start-ups

The Institutional Trading Platform (ITP), for which a draft proposal was published earlier this year, will be open to technology-intensive companies in which qualified institutional buyers (QIBs), including venture capital investors, hold at least a 25% stake, pre-offering. For all other companies it is 50%.

Disclosure requirements and post-offering lock-up period of six months are lower than those set out for India's major bourses. However, only two categories of investor can back these companies: institutional players such as QIBs, non-banking financial companies and family offices; and non-institutional investors. The allocation ratio between the two categories is expected to be 75-25.

At least 200 investors must participate in each offering, with no single institutional investor allowed to account for more than 10% of the issue size. No individual or group may own above 25% of the post-issue capital.

Companies have the option of migrating to the main board after three years, provided they meet eligibility requirements, according to a SEBI release.

On IPOs, the regulator will reduce the period between the offering and the listing from 12 days to six days, improve access to offerings for retail investors, and cut the costs involved in public issues of equity shares and convertibles. Follow-on offerings and rights issues can also be fast-tracked by reducing the minimum public holding requirement in certain cases.

Investors have regularly complained at bureaucratic obstacles holding back IPOs in India. It takes time - in some instances as long as a year - for listings to get approved by SEBI, in part because the regulator subjects candidates to heightened scrutiny in order to safeguard the interests of retail investors.

Another sticking point is the concept of the promoters and the lock-in of shares. SEBI requires that at least 20% of a promoter's post-issue capital be locked-up for three years. However, in the case of private equity-backed companies the promoter often doesn't hold as much as 20%, while the largest shareholder is typically a financial investor looking to exit.

AVCJ Research's records show there have been five private equity-backed IPOs in India so far this year, with the proceeds of these offerings reaching $326.8 million. This compares to $141.9 million from four offerings in 2014 and $214 million from two in 2013. In 2010, PE investors saw 25 portfolio companies go public, raising $2.2 billion between them, and facilitating 12 partial exits.

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• Topics
• Regulation
• North Asia
• Exits
• IPO
• India
• regulation
• Exit
• SEBI