Bombay Stock exchange - flickr

Securities Exchange Board of India (SEBI) chairman UK Sinha said that the markets regulator will set up a new alternative trading platform for Internet startups to list on the markets and relaxed norms for the same, reports Reuters. Sinha told reporters in a press conference that lock-in period for investors in start-ups to six months compared with three years for regular initial public offerings (IPO) and that disclosure norms for them would be significantly reduced.

SEBI’s board also said the stock exchanges would have a separate institutional trading platform for listing of start-ups from the new age sectors, including e-commerce firms, while the minimum investment requirement would be Rs 10 lakh and at least 25% of their pre-issue capital would need to be with institutional investors for technology start-ups, while this requirement would be 50% for companies from other areas, as indicated by this Press Trust of India report.

Under the new norms, 75% shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors. For non-institutional categories, it will be on proportional basis.

Indiainfoline in a report also said that UK Sinha outlined the process of E-IPO Norms. The listing time for companies is planned to be reduced to 6 days from the earlier 12 days, from the date of filing. Moreover, the companies with market capital of Rs 1lakh crore can avail fast track IPO issuance.

Sebi also said that ASBA (Application Supported by Blocked Amount), which refers to an application mechanism for subscribing to IPO with the bid amount blocked in a bank account rather than that being debited, will be applicable to all kinds of investor categories and all IPOs.

Disclosure norms

Earlier in March, SEBI in a discussion paper had proposed setting up institutional trading platforms for startups and had called for lower disclosure norms. Some of them are:

– The regulator relaxed disclosure norms by allowing startups to state the main object of the issue for general corporate purpose. The regulator said the disclosure may be restricted to only broad objects in line with major international jurisdictions.

– The basis of issue price may include disclosures, other than projections, as deemed fit by the issuers accessing the market on the institutional platform in order to enable investors take informed decisions.

– Complete details about creditors should be disclosed on the web page of the company. The disclosure in the offer document should be based on materiality thresholds as defined and disclosed in the offer document and shall provide link to the webpage of the company where full details are disclosed. Only consolidated information on dues to SMEs and other creditors shall be disclosed in the prospectus.

Image credit: Flickr user Nicolas Mirguet