The Securities and Exchange Board of India (Sebi) has made amendments of rules to permit listing of start-ups and SMEs in Institutional Trading platform (ITP) without having to make an IPO.
Lack of exit opportunities for existing investors and restricted access to new investors is a major problem faced by start-ups and SMEs.
In a circular dated October 8, Sebi said that the minimum amount for trading or investment on the ITP would be Rs 10 lakh.
The move is aimed at providing easier exit options for entities such as Angel Investors, Venture Capital Funds and Private Equities.
Besides, the move would provide better visibility, wider investor base and greater fund raising capabilities to such companies.
Sebi said the company would not make an IPO while its specified securities are listed on ITP but can raise capital through private placement or rights issue "without an option for renunciation of rights."
According to Sebi, a SME will be eligible to list on the ITP, in case the company, its promoter, director, group company does not appear in the defaulters list of Reserve Bank and there is no winding up petition against the firm.
Among other conditions, the company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction (BIFR) within a period of five years prior to the date of application for listing.
Besides, no regulatory action has been taken against the company seeking to list on ITP , its promoter or director, by Sebi, RBI, Insurance Regulatory andDevelopment Authority (IRDA)or Corporate Affairs Ministry within five years prior to the date of application for listing,
"The company has atleast one full year's audited financial statements, for the immediately preceding financial year at the time of making listing application," Sebi said.
Sebi also said that a SME seeking to list on ITP needs to fulfil any of the six criteria including a minimum investment of Rs 50 lakh in its equity shares by at least one alternative investment fund, venture capital fund or other category of investors as approved by the regulator.
An investment of atleast Rs 50 lakh by a Qualified institutional buyer (QIB) or a merchant banker in the equity shares of the SME with a lock-in period of three years from the date of listing. Besides, a specialised international multilateral agency or domestic agency or a public financial institution has invested in the equity capital of the SME.
"The company has received money from a scheduled bank for its project financing or working capital requirements and a period of three years has elapsed from the date of such financing and the funds so received have been fully utilised," Sebi said.
The regulator said "not less than 20 per cent of the post listing capital will be held by the promoters at the time of listing of specified securities of the SME which shall be locked-in for a period of three years from date of listing."
Regarding exit norms, Sebi said that a company can exit from ITP if its shareholders approve such proposal by passing a special resolution through postal ballot where 90 per cent of total votes and the majority of non-promoter votes have been cast in favour of this and the stock exchange approve such exit.
A company whose securities are listed on ITP will exit the platform "in the event of its specified securities have been listed on this platform for 10 years, the company has paid up capital of over RS 25 crore, revenue of more than Rs 300 crore and market capitalisation of more than Rs 500 crore."
A company listed on ITP will be delisted in case it failed to file its periodic filings with the stock exchange for more than one year, or it has not complied with corporate governance norm(s) for more than one year.