Sebi to prepare new norms for start-up IPOs

Market regulator Sebi is planning to bring in a new set of guidelines in next 3-4 months to help start-ups tap the capital markets to raise funds.

A meeting has been called with start-ups on March 27, after which a discussion paper will be floated on Initial Public Offers (IPOs) by such entities, Sebi chairman U K Sinha said on Friday.

The final guidelines should be there in 3-4 months, Sinha said on the sidelines of a conference organised by the regulator on REITs (Real Estate Investment Trusts).

While Sinha did not disclose further details, sources said a number of e-commerce firms, including start-ups, have been lobbying hard to seek relaxation in IPO norms.

The regulator is, however, firm on measures to safeguard investors and the same would be incorporated in new guidelines after taking into accounts feedback from the proposed public consultation process.

Sebi is of the view that the investor interest is paramount in its regulatory regime and the norms, including for detailed disclosures and strong financial positions, are necessary to ensure safety of investors' money.

The firms providing Internet-based services are, however, seeking relaxation on many of these norms, as most of them are start-ups and operate out of a digital landscape, while their valuations are mostly linked to future growth potential.

Representatives from the industry, along with some venture capitalists and private equity funds, had met Sinha earlier also to present their case.

Sebi is ready to provide an 'enabling environment' for prospective listings by companies with good track records, but it is averse to the idea of relaxations that could hamper investors' interests.

The regulator also wants many such companies to tap the SME platform of the stock exchanges to get listed for easier regulations, but most of the firms are eyeing big valuations and have told Sebi that they might have to go to the foreign markets for their listings.

The regulator is also in the process of framing norms for raising funds through crowd-sourcing and it feels that some small start-ups can tap that route as well.

One of the proposals include allowing easier norms for overseas entities to participate in such public offers, as also for enabling easier post-listing exit routes for the venture capital and private equity firms.

Those lobbying for relaxation in norms include iSpirit, a lobby group for the technology companies, which describes itself as "a think tank with a difference".

As per its website, iSpirit aims to "convert ideas into policy proposals to take to government stakeholders" and as part of its advocacy efforts, they "explain, educate and inform government policy makers and other policy bodies that a vibrant software product industry is vital to India's future".

One of its senior advisors include Mohandas Pai, who was a Director of Infosys and has also served as a Member on Sebi board in the past.

Besides, he has been on various important panels, including as Chairman of Sebi's Primary Markets Advisory Committee (PMAC). Sebi chairman U K Sinha said the regulator has discussed the issue of IPO by start-ups and e-commerce firms and it is of the view that such companies should be listed in India.

"We want our companies to list in India rather than being forced to list outside India. In December, we had a meeting with about 40-50 people in Bengaluru and we tried to understand their requirements.

"It appears that a certain set of rules will have to be carved out for them because they have a very specific business model.

"This was followed up by a discussion with the Primary Market Advisory Committee of Sebi recently and now on March 27, I've invited them here and we will be having a discussion.

"After that, we will float a discussion paper regarding start-ups and we hope that within 3-4 months, we will be having our policy in place. We want them to get listed here," he added.

There have been reports that the largest Indian e-commerce firm Flipkart may look at the US market for its listing, while the closest listing that has taken place from this industry in India is JustDial.

Meanwhile, a clutch of e-commerce firms from India have raised venture capital funding with the sector expected to grow at a scorching pace.

Last year, e-commerce giant Alibaba raised $25 billion in the world's biggest initial public offering about 15 years after the Chinese firm was founded in 1999.