In what should be music to ears for Indian startups, SEBI plans to make changes in the rules that could make it easy for Indian startups to take IPO route to raise funds. This is a clear indication that the regulatory body wants to create a more appealing environment to Indian Entrepreneurs.
This step has also been taken because very few startups, especially new age tech startups, have preferred to do a Initial Public Offering on Indian bourses. Most of the startups who have taken IPO route have preferred to go on foreign lands to list their companies.
Over past couple of years, SEBI has been coming up with amendments and policies in an effort to make Indian bourses attractive for startups in India. In 2013, SEBI had approved the proposal for amendment of SEBI Regulations to permit listing of Start-ups and SMEs in Institutional Trading platform (ITP) even without having to make an IPO.
What Are the Changes SEBI is proposing?
According to Reuters report, who have cited undisclosed sources, two or three main changes are expected to be done to listing rules.
Firstly, SEBI is considering easing rules on mandatory disclosure for the draft prospectuses of Internet-based firms. This rule change is clearly targeted towards ecommerce and Internet startups in India that are now seeing billion dollar valuations. Companies like Flipkart and Snapdeal have multi-billion dollar valuations – and if and when they go for IPO, SEBI wants them to do it on Indian bourses. In current scenario, none of these companies have shown any inclination to list on local exchanges. This obviously means heavy loss of revenues for local exchanges as well as desi investors.
Secondly, SEBI plans to scrap the need to detail the use of proceeds raised from Initial Public Offering. Again, this is clearly targeted at internet and mobile tech startups in India. It is very difficult for internet and tech startups to furnish such details, because the vertical they cater to is extremely fluid and dynamic. A company like Flipkart or Snapdeal may have some plans now, but 6 months down the line they may need to change due to changes circumstances around them. In such a scenario, if they have to give details of where they are going to use the money raised at the time of IPO, it becomes extremely difficult.
Apart from these two main changes, SEBI is also looking at easing the accounting and financial reporting practices used by the e-commerce firms.
It is pleasing to see that SEBI is making these changes as Indian startup market is currently the third fastest growing market in the world. There are going to be far more new age billion dollar startups that are expected to come out of India. And unless, SEBI creates a business-friendly environment for these startups, they are going to lose out…big time!
[Image: Shutterstock.com]
