SEBI likely to roll back the relaxation proposed for listing of Indian start-ups

The Ministry of Corporate Affairs (MCA) has asked the market regulator SEBI to partially roll back a relaxation proposed for listing of start-ups in India. Spare a few minutes to know more about it……

Special platform for start-ups

Currently, the market regulator has created a special platform to cater to the start-ups looking for a listing, which is called Innovators Growth Platform (IGP). This is a niche platform that can only be accessed by big ticket institutions and wealthy investors, and hence has limited liquidity compared to the main board where all the bluechip stocks trade.
A start-up that has listed on the IGP platform can migrate to the main board provided the company meets several conditions, including a profit of at least Rs 15 crore in the last three years.

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No Profit track record

However, if the start-up does not have the profit track record, it can still migrate to the main board provided 75% of the shareholders of the company are institutional investors.
Several startups and VC firms made representations to Sebi seeking a relaxation to this rule since it was difficult to achieve 75% institutional holding.
Even among the blue-chips, only a handful of companies have such high institutional holding. Based on the industry feedback, Sebi proposed to lower the threshold to 40% from 70%.

MCA opposes the relaxation

However, MCA opposed this relaxation saying the limit was too lenient and instead recommended that the threshold should be 50%. Sebi eventually agreed. Sebi and MCA were unavailable for comment.
“MCA has commented that the 40% dilution is too low and must be reviewed so that the Company does not take unfair advantage of having first listing with IGP and then getting moved to Mainboard,” said minutes of Sebi board meeting dated March 25,2021. “In view of the comments from MCA…we may reduce this stipulation of 75% of capital with QIBs (qualified institutional investors) to 50% instead of 40% as proposed in the consultation paper.”

Keywords: chalgenius, start-ups, atmanirbhar bharat, vocalforlocal, SEBI, MCA, Mininstry of Corporate Affairs.

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