Market regulator Securities and Exchange Board of India’s (SEBI) move to allow issuance of shares with differential voting rights (DVRs) has brought cheer to startups who have welcomed it.
Bhavish Aggarwal, Ola CEO said, "Welcome SEBI's move to allow Differential Voting Rights for Indian tech companies. I‘m certain this will encourage Indian companies to list within the country, backed by our own people. Made in India businesses and entrepreneurs can control their destiny and build for the world!”
SEBI said that amendments will be made to the relevant regulations which will put the new rule into effect. In a media statement, SEBI said that the new framework will be implemented from July 1 and will facilitate the promoters of such companies to go in for initial public offers.
Harshil Mathur, CEO & CoFounder of Razorpay said, "Overall, we welcome the move by SEBI to approve the framework on Differential Voting Rights (DVR) for start-ups. However, we believe the restrictions will need to be re-looked at over time in order to make the best use of this development. This is something we have always been advocating especially for tech companies and now we look forward to take a lead on."
Differential voting rights are like ordinary equity shares, however, DVR shareholders have lesser voting rights in contrast to the rights of an ordinary shareholder.
The move will potentially allow startup founders to have more control over their ventures even after diluting a major portion of their stake, during the process of equity financing involving multiple rounds.
SEBI chairman Ajay Tyagi said that as per the new rule, a tech company with superior voting rights shares (SR shares) can go for an initial public offering of only ordinary shares to be listed on the main board.
The companies that intensively use technology, information technology, intellectual property, data analytics, biotechnology or nano-technology to provide products, services with significant value addition come within the definition of tech companies.
Snapdeal Founder Kunal Bahl said, “SEBI’s approval for DVR for tech startups looking to list in India is a fantastic step in the right direction which will encourage more Indian tech startups to go public in India. We need to make attractiveness of listing in India on par with listing on NYSE/NASDAQ.”