Amendment to Regulations on Institutional Trading Platform- Innovation Growth Platform 1.0

Background

In the year 2016, Securities Exchange Board of India (SEBI) had introduced Institutional Trading Platform vide amendment to the SEBI Regulations (Issue of Capital and Disclosure Requirements), 2009 (SEBI ICDR Regulation) to facilitate listing of start-ups in sectors like e-commerce, data analytics and bio-technology to raise funds and get their shares traded on stock exchanges. However, due to strict norms and inability to access the platform, this initiative was not effective. In the wake to kick start listing of securities by the start-ups, with effect from 5 April 2019, SEBI further amended the SEBI ICDR Regulation (Amendment Regulation). The Amendment Regulation is notified to bring change in the start-up ecosystem by making the platform more accessible and more attractive for the new age ventures.

Key Changes

SEBI has tweaked the existing listing norms of the Institutional Trading Platform and has made the following changes:

Particulars Old Provision Amended Provision
Change of name Earlier it was known as Institutional Trading Platform (ITP) The platform has been renamed as ‘Innovators Growth Platform‘(IGP).
Eligible Issuers In addition to start-ups, any company having Qualified Institutional Buyers (QIBs) as their shareholders to the extent of at least 50% of pre-issue capital was eligible to list on the ITP. IGP has been designed to facilitate listing of the companies that provide products and services or business platforms in the areas of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology are eligible to list on the IGP.
Shareholding Requirement At least 25% of the pre-issue capital to be held by QIBs. Listing can be done by way of IPO or even without an IPO process.

(a)   IPO Process: At least 25% of the pre-issue capital (for at least 2 years) to be held by either: (a) QIBs; (b) a pooled investment fund with minimum assets under management of USD 150 million (subject to meeting other prescribed criteria for such pooled investment fund); (c) accredited investors (not more than 10%); (d) Cat III FPI; or (e) family trusts with net-worth of more than INR 500 Crores.

(b)   Without IPO process: no such minimum offer to the public is required.

Post-issue shareholding Earlier, there was a requirement that no person, individually or collectively with other persons acting in concert, to hold 25% or more of the post-issue capital. This requirement has been done away with.
Minimum application size INR 10 lakh INR 2 lakh (this brings relaxations)
Allocation 75% to institutional investors 25% to non-institutional investors There is no minimum reservation requirement. Also, the allocation will be on proportionate basis to institutional and non-institutional investors.
Minimum number of allottees 200 50
Minimum trading lot INR 10 lakh INR 2 lakh

 

Conclusion

Though very less, off lately we have seen few tech companies like Tejas Networks, Koovs, Matrimony.com, etc. who have taken the IPO route to raise funds. Despite the vagaries of market, going public not only provide recognition but also shows that the start-up is beyond mortality. The Amendment Regulations have tried to simplify the listing norms and with this, SEBI intends to attract a greater number of investors on the IGP and aims to provide a much-needed boost to start-ups looking to access the capital markets.

Source:https://www.sebi.gov.in/legal/regulations/apr-2019/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-second-amendment-regulations-2019-_42644.html

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