Tag Archives: IPO

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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Regulatory update: SEBI – Compensation to Retail Individual Investors (RIIs) in an IPO.

SEBI vide its circular dated 15 February 2018 has directed that RIIs applying for shares in IPO should be compensated if Self Certified Syndicate Banks (SCSB) fail to make the allotment despite of RIIs eligibility.

In order to bring uniformity in the calculation of compensation available to the RIIs, SEBI has stated that the compensation shall be calculated as below:

(Listing price– issue price) *multiplied by* (no. of shares that would have been allotted if a bid was successful) *multiplied by* (probability of allotment of shares determined on the basis of allotment).

Source:

https://www.sebi.gov.in/legal/circulars/feb-2018/compensation-to-retail-individual-investors-riis-in-an-ipo_37864.html

Regulatory Updates: SEBI- Circular on Minimum Public Shareholding

SEBI vide its circular dated 22 February 2018 has provided the following methods for complying with the Minimum Public Shareholding (MPS) requirement:

  1. Open market sale of shares held by the promoters/promoters group up to 2% of the paid-up equity share capital of the listed entity in the open market subject to five times average monthly trading volume of the shares of the listed entity.
  2. Qualified Institutions Placement (QIP).

QIP offers a quick solution to listed entities enabling them to meet MPS requirements apart from meeting their funding requirements. Also, a sale of a certain small percentage of shares through the open market will facilitate quicker and cheaper compliance for listed entities where promoters hold shares marginally above the threshold limit.
Rule 19A of the Securities Contracts (Regulations) Rules, 1957 stipulates that every listed company shall maintain a public shareholding of at least 25%. Listed public sector companies have been provided additional time till 21 August 2018 to comply with the requirements.

Accordingly, listed entities that have a public shareholding of less than 25% are required to adopt any of the certain methods to comply with the MPS requirements, such as issuance of shares to public through prospectus, offer for sale to public through prospectus, Sale of shares held by promoters through secondary market, Institutional Placement Program, rights issue to public shareholders, bonus shares to public shareholders, open market sale and QIP.

Source:
https://www.sebi.gov.in/legal/circulars/feb-2018/manner-of-achieving-minimum-public-shareholding_37953.html