India to create IPO platform for startups

Market regulator of India, Sebi, will create a platform to help startups get listed and raise funds.

India’s market regulator, the Securities and Exchange Board of India (Sebi), will be implementing new changes to help startups access funding and go public. The plans will embrace current technology to create a new electronic system for startups that wish to embark on their initial public offering (IPO).

The move comes at a time when India’s startup scene is thriving, and hopes to stem the flood of fast-growing companies moving abroad to take advantage of the lighter regulation rules in countries such as Singapore and the US.

India’s new MUDRA bank launched

Recently, India’s new MUDRA bank was launched to aid micro and small businesses gain access to funding. However, the problem is now seen when these companies realise the need to go public, and redomicile to a country where it’s easier to do so.

“We need to make it clear that we want people to raise on an Indian platform or else we will lose our market to the Nasdaq, or Singapore, or London,” said Uday Kotak, founder of Kotak Mahindra bank, to the Financial Times.

Policy makers will be looking to ensure that domestic tech companies choose to list in their own country, rather than fleeing abroad. As such, the creation of a new institutional trading platform (ITP) will remove a number of requirements on companies that wish to float, partly because the new platform will not be made available to retail investors.

The ITP will particularly remove the need for companies to be profitable for three consecutive years before their flotation, a requirement that holds back many of India’s young startups. Meanwhile, Sebi is planning to lighten the rules concerning disclosure for startups in line with major international jurisdictions.

Detailed guidelines rumoured for late June

Detailed guidelines on Sebi’s plans for e-IPOs are likely to come out later in June and will allow investors to bid for shares on the internet, getting rid of the current long documents for bidding. Furthermore, Sebi will likely drastically reduce the length of time it takes to list shares after the IPO - slashing the waiting time to two to three days, compared to 12 days.

It opens the door to those Indian startups that have previously been unable to float, while giving the opportunity for those that are forced overseas by strict regulations to stay domestic. As homegrown Indian startups continue to thrive, there will likely be a number of IPOs taking place on the new platform in the near future.