The Securities & Exchange Board of India (SEBI) has relaxed listing norms for startup companies, promoting them to tap the local market and open up new avenues for investors.
Startups will be able to list on the alternative institutional trading platform (ITP) that will allow startups to list themselves without an initial share sale.
The promoter concept, lock-in requirements and diluted fund-usage disclosures have also been done away with under the new norms targeted at startups.
SEBI hopes the move will defer Indian startups from listing abroad.
India is the 5th largest startup market in the world, and is expected to become the third largest by the end of the decade.
Prime targets of the new relaxed norms are Indian e-commerce giants Flipkart and Snapdeal, which are valued at several billions of dollars thanks to multiple rounds of foreign funding.
The e-commerce market in India alone is expected to be worth $100 billion in the next five years.
SEBI has stipulated that no more than 25% of the raised amount can be used for general corporate purposes.
A minimum application size as well as trading lot of Rs 10 lakh which should keep retail investors out due to the high risk.
Investors will soon be able to apply online for initial public offering (IPO) and the time taken for the process will be halved to six days.
SEBI has also made the Application Supported by Blocked Amount (Asba) system mandatory for retail investors, where funds remain in a buyers account until shares are allotted.
The board has also approved the reclassification of promoters as public shareholders in the case of an open offer or M&A where a new promoter replaces the older one.
Further, an outgoing promoter can’t have any control over the company directly or indirectly.