Illustration: Biswarup Gooptu
Illustration: Biswarup Gooptu

Markets regulator Securities and Exchange Board of India (Sebi), which has been trying to get its Innovators Growth Platform (IGP) off the ground, is expected to come out with its latest draft for the platform, which has been touted as India’s answer to global tech bourses, such as Nasdaq.

IGP, which has been in the works for some years now, and was previously known as the Institutional Trading Platform, before being renamed last year, has found few takers till date, with the Indian startup and venture capital ecosystem asking for a number of recommendations to be included in the latest draft of the IGP.

Two key suggestions include, having Indian family offices, a number of which are largely structured as trusts to be added to the list of accredited investors, which currently have only individuals and body corporates, and making the delisting norms easier, to facilitate more potential mergers and acquisitions and exits.

“In India, most family offices have been structured as trusts. Family offices are currently sitting on $2.1 trillion of assets. While most of it is currently in listed markets, but they are now slowly coming over to invest in startups and other alternative assets. You have to have them on board,” a venture capital investor said, on the condition of anonymity.

An email sent to Amarjeet Singh, executive director at Sebi, did not elicit any response at the time of going to press.

Sebi introduced the Institutional Trading Platform (ITP) in 2015. They introduced radical changes to the ITP and renamed it as the Innovators Growth Platform (IGP) in December, 2019. IGP is a trading platform introduced by Sebi for new-age technology companies and startups. The revamp came after the ITP failed to gain much traction.

Interestingly, it has been touted as India’s answer to Nasdaq, at the time of being floated, because Sebi recognised the need for startups having an exclusive platform, hence the comparison emerged with that of Nasdaq in the US, which boasts new-age technology companies such as Amazon, Facebook, Netflix, Google and the likes. The purpose was originally to ensure a separate dedicated platform be provided for new age technology companies including start-ups in sectors like technology, intellectual property, data analytics, biotech or nanotech.

“Sebi has been working hard on the IGP by speaking directly to market participants to prevent the same issues that has caused the SME exchange to be labelled as a “graveyard” by the industry.” A venture capital investor, who has been part of the discussions with Sebi, told ET.

The major changes were pertaining to eligibility criteria for companies to list on the platform, minimum application size and number of allottees, allocation criteria to investors, trading lot and migration to the Main Board.

“For a significant unlock to happen in the startup investing space, family-owned businesses and their various forms should also be ideally brought under accredited investors to ensure that Indian startups are able to directly tap into these large segment of funding,” Rameesh Kailasam, chief executive of advocacy firm IndiaTech, also pointed out.

In May last year, Sebi had, in a consultation paper, had floated that minimum promoters’ contribution will be 20% of the total capital, and if there is shortfall, it can be made up to 10 per cent through contribution from alternative investment funds (AIFs), foreign venture capital investors, commercial banks, public financial institutions or insurance companies. Such capital shall be locked in for a period of three years.

If such entities have served a lock-in period of six months at the time of listing of shares on the IGP, such period shall be deducted from the lock-in requirements. These too, were rejected by the startup ecosystem at the time, as too stringent.

“The minimum promoter’s contribution, with or without lock-in, continues to be a challenge while listing on the Main Board through the QIB route or even migrating from IGP to the Main Board, for companies desirous of listing with an identified promoter. The IGP has paid-up capital thresholds and investor participation limitations which could work for initial stage start-ups but do not fit the bill for start-ups once they have grown and diluted stake. Moreover, the eventual aim of all start-ups is to graduate to the main bourses which at this given time is not probable given the 20% minimum promoter stake requirement continues to exist.” Kailasam said.

The delisting norms currently state that withdrawal of approval by the stock exchange can be done under if the recognised stock exchange may delist the specified securities of an issuer listed without making a public issue upon non-compliance of the conditions of listing the manner as specified by the stock exchange, no issuer promoted by the promoters and directors of an entity delisted under sub-regulation, shall be permitted to list on the innovators growth platform for a period of five years from the date of such delisting, and provided that the provisions of this regulation shall not apply to another issuer promoted by any of the independent directors of such a delisted issuer.

“IGP has failed in its efforts to woo the start-up founder ecosystem primarily because the path to Main Board listing does not seem smooth and therefore creates a risk of a company being trapped in IGP for life. The minimum promoter requirement in case of a promoter led listing stands as a sore thumb in this process. In such a situation startups would prefer to list abroad in foreign exchanges than be stuck on an IGP model. As long as the provision for listing in the Main Board does not remains seamless and adequate relaxations brought in, IGP will remain a non-starter,” Kailasam said.





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