Has SEBI come out with new set of norms to encourage IPOs by start-ups in India?

With the IPO markets picking up steam and issues getting smartly oversubscribed and complemented by aggressive listing, SEBI sees the right opportunity to take IPO norms to the next step. In that direction, the regulator has put out a discussion paper eliciting responses to some key areas of encouraging IPOs by start-ups in India.

The idea is to avoid the export of capital raising, which is what is happening today. In order to encourage more start-ups to enter the IPO market, SEBI has proposed relaxing some of the norms that specifically pertain to such start-up IPOs. These relaxations will include simpler listing norms and also concessions in holding period stipulations.

SEBI proposed reduced holding period for pre-issue capital and also allowing discretionary allotment to eligible investors. This will go a long way in tapping angel investors and other HNI segments who will have a better understanding of the start-up scenario. Start-ups will also get a bigger boost for their proposed IPO plans and they can do it in India itself.

The proposed changes also envisage differential voting rights or DVR for the promoters so as to maintain control even as they raise more capital. It will also allow institutional investors to hold superior voting rights as compared to other retail investors. In fact, SEBI has also suggested reducing the period of holding.

As per SBI, the holding period for 25% of the capital can be reduced from the current two years to just one year. SEBI may also permit allocation of 60% of the total issue size on discretionary basis prior to opening up of the issue. IT also contains a proposal is to exempt AIF Category-2 investors from post-issue lock-in requirements; to make it more attractive.