Listing sans IPO, fund raising now a reality for SMEs

Sebi has announced measures to enable listing of start-ups and SMEs on a new institutional trading platform

India's large number of small and medium enterprises (SMEs) will soon have an option of listing their company without having to make an initial public offering (IPO).

The market regulator Sebi today announced measures to enable listing of start-ups and SMEs on a new institutional trading platform (ITP).

The move will provide an exit opportunity for existing investors and will also help such companies tap new investors.

“Lack of exit opportunities for the existing investors and restricted access to new investors is one of the problems faced by start-Ups and SMEs,” said Sebi in a press release.

The market regulator said that the move to enable listing and trading in start ups and SMEs is aimed at providing easier exit options for informed investors like  angel investors, venture capital funds and private equity.

Sebi believes the move will also provide better visibility, wider investor base and greater fund raising capabilities to such companies.

The ITP will only be accessible for investment to the informed investors only and the minimum amount for trading or investment on this platform will be Rs 10 lakh, said has said.

The regulator has provided an exemption to SMEs and starts from the requirements of rule 19(2)(b) of SC(R)R 1957, under which companies have to offer up to 25% of its shareholding through an IPO.

“Therefore the listing can be done without an IPO and the expenses associated with it. While such companies are listed on the ITP they will not be permitted to raise capital though they can continue to make private placements,” Sebi has said.

Sebi is soon expected to prescribe norms for entry for companies, eligibility criteria, disclosure requirements and corporate governance to participation on ITP.