SEBI has proposed to reduce the minimum application size for investing in a starup IPO from Rs 10 lakh to Rs 2 lakh.

SEBI proposes relaxing listing norms for startups
Atom Startups Saturday, October 27, 2018 - 14:32

Indian market regulator Securities and Exchanges Board of India (SEBI) has come out with a series of proposals to make it easier for entrepreneurs in the country by looking at easing listing norms. There are already certain norms in place for IPOs, initial listing of the shares of startups in the stock markets and trading in them. SEBI has now put out a discussion paper where it suggests relaxation of several of these norms with a view to help the stakeholders feel more comfortable running the startups.

Some of the key proposals include dropping the minimum application size for investment in a startup IPO be Rs 2 lakh from the current Rs 10 lakh. Similarly, the minimum trading lot for shares of a listed startup be reduced to Rs 2 lakh from Rs 10 lakh.

The SEBI panel also proposed that there should be no minimum reservation of allocation to any specific class of investors.  There is also a recommendation that the requirement that a minimum of 200 share allottees should be there in a startup IPO be reduced to 50.

Another proposal is to bring in uniformity in the lock-in period stipulation and remove any exemptions in the case of shares held pre-IPO in startups. In the current dispensation, all those holding stakes in a startup before it goes for an IPO and listing have to follow a lock-in period of six months before they can liquidate their shares. But certain category of investors, like VCF/AIF Category I/FVCI etc. are exempted from this lock-in requirement. In the proposal put forth by SEBI now, these exemptions will be removed and the lock-in will apply to all pre-IPO stake holders  

SEBI had earlier suggested that the present condition that the promoters or any other entity is not allowed to hold more that 25% equity in any startup in a post-IPO listing scenario be also done away with.  

Apart from these, SEBI has taken a closer look at ITP, the institutional trading platform that was created by it to facilitate trading by institutional investors, but the ITP has not lived up to the regulator’s expectations. In this discussion paper, SEBI has referred to the platform and wants suggestions from the different stakeholders to make it useful to the investors and the traders of instruments. SEBI has asked for public comments on the proposal by 16 November.

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