To help start-ups tap the capital markets to raise funds, regulator Sebi is planning to bring in a new set of guidelines in next 3-4 months. A meeting has been called with start-ups on March 27, after which a discussion paper will be floated on Initial Public Offers (IPOs) by such entities, Sebi chairman U K Sinha said today.
The regulator is, however, firm on measures to safeguard investors and the same would be incorporated in new guidelines after taking into accounts feedback from the proposed public consultation process. Sebi is of the view that the investor interest is paramount in its regulatory regime and the norms, including for detailed disclosures and strong financial positions, are necessary to ensure safety of investors' money.
The firms providing Internet-based services are, however, seeking relaxation on many of these norms, as most of them are start-ups and operate out of a digital landscape, while their valuations are mostly linked to future growth potential. Representatives from the industry, along with some venture capitalists and private equity funds, had met Sinha earlier also to present their case. Sebi is ready to provide an 'enabling environment' for prospective listings by companies with good track records, but it is averse to the idea of relaxations that could hamper investors' interests.
The regulator also wants many such companies to tap the SME platform of the stock exchanges to get listed for easier regulations, but most of the firms are eyeing big valuations and have told Sebi that they might have to go to the foreign markets for their listings. The regulator is also in the process of framing norms for raising funds through crowd-sourcing and it feels that some small start-ups can tap that route as well. One of the proposals include allowing easier norms for overseas entities to participate in such public offers, as also for enabling easier post-listing exit routes for the venture capital and private equity firms. Those lobbying for relaxation in norms include iSpirit, a lobby group for the technology companies, which describes itself as "a think tank with a difference".
As per its website, iSpirit aims to "convert ideas into policy proposals to take to government stakeholders" and as part of its advocacy efforts, they "explain, educate and inform government policy makers and other policy bodies that a vibrant software product industry is vital to India's future". One of its senior advisors include Mohandas Pai, who was a Director of Infosys and has also served as a Member on Sebi board in the past. Besides, he has been on various important panels, including as Chairman of Sebi's Primary Markets Advisory Committee