More than an innovative exit route

More than an innovative exit route

Important Facts:

• SEBI has introduced relaxation measures for startup companies to raise funds and get their shares traded on stock exchange
• The ‘Institutional Trading Platform'(ITP) created by SEBI for listing of companies has been renamed as ‘Innovators Growth Platform'(IGP)

Benefits of Innovators Growth Platform:

• IGP helps investor in StartUp to divest their shares without making a public offer
• IGP provides more profitability and have less stringent measures than other platforms like SME platform or main board of exchanges (NSE, BSE)
• IGP allows startup to trade its share under regular category on main board platform after one year of listing instead of two year earlier
• Widened investor base which includes in addition to Qualified Institutional borrowers – Family trust, Pooled investment fund and Pre listing investors or Accredited investors
• Reduced the minimum application size for investors from Rs 1 million to just Rs 200,000.
• Removal of current ICDR (Issue of Capital and disclosure requirement) norms which caps single entity holding not more than 25% of the post issue capital

Concerns for IGP:

• Needs to look beyond listing into post listing interest generation in such securities
• Needs to improve liquidity in companies already listed on the platform for benefit of investment in future startups

Way forwards for IGP:

• Besides providing easy exist to existing startup companies, IGP can become fund base for future growth of startups
• SEBI need to relax rule of listed startup not making Initial public offering
• IGP could acts as platform for showcase eligible startup for investors to park in money
• SEBI could consider introducing market makers at IGP for active secondary market for startup investment