The Securities and Exchange Board of India (Sebi) on Tuesday further streamlined the process of initial public offering by reducing the time period for listing of issues from 12 to 6 days. Start-ups will now also be allowed to raise funds from institutional investors under new rules approved by the regulator.
Under the new norms which will be applicable from January, 2016, Applications Supported by Blocked Amount (ASBA) will be mandatory for all class of IPO investors. “There will be more points of IPO application acceptance, allowing depository participants, registrars and transfer agents to accept physical as well as online application forms,” said UK Sinha, chairman of Sebi.
Sebi’s board also finalised the guidelines for start-ups and new age companies giving greater access to such firms in raising funds through alternative means. According to the new Sebi rules, only qualified institutional buyers (QIBs) and non-institutional investors (NIIs) will be allowed to invest in such companies through an institutional trading platform (ITF).
Companies which are technology intensive such as intellectual property, biotechnology, nano-technology will be allowed to list provided 25 per cent of pre-issue capital is through QIB. In case of any other company at least 50 per cent of the pre-issue capital should be held by QIBs.
According to the Sebi rules, the lock-in for the entire pre-issue capital will be for six months. The minimum investment in such companies has been set at Rs 10 lakh.
“The disclosure norms have been substantially diluted because we don’t have retail investors here. Disclosures on litigation can be decided by the board on concept of materiality,” said Sinha.
Further, Sebi has introduced a policy framework for re-classification of promoters in listed firms to public shareholders. Now, if a company becomes professionally managed then it will not have any identifiable promoter and no person in the company can hold more than 1 per cent shares of the company. Also an outgoing promoter cannot hold more than 10 per cent of the shares of the company. Such a promoter cannot have any direct or indirect control over the company and any special rights.
Sebi board has reduced the minimum public shareholding for fast track issuances to Rs1,000 crore for follow on public offering and Rs 250 crore for rights issue.
To ensure increased retail participation in the offer for sale process, Sebi has decided to include a banking day in the T-2 notification period. Sebi has also made it “mandatory for sellers to provide the option to retail investors to place their bids at cut off price (default option) in addition to placing price bids”.
Sinha on Tuesday said that the market watchdog has initiated a gap analysis on systems in Sebi and the Forward Markets Commission (FMC) ahead of the merger of the two regulators. “We have assured the government that we will be able to take entire responsibility by end of September,”said Sinha.