The Securities and Exchange Board of India (Sebi) relaxed qualifications and listing conditions for the Innovators Growth Platform (IGP), a separate exchange venue for new-age startups, on Thursday. Currently, an institutional investor and other major investors must own 25% of a company's pre-issue capital for at least two years in order for it to be listed on IGP. This requirement has been reduced to one year by Sebi. Furthermore, up to 25% of the pre-issue shareholding of ‘accredited investors' – an individual investor with a net worth of Rs 5 crore – will be allowed for the above eligibility criteria. Previously, a limit of 10% of pre-issue portfolios of accredited holders is considered for the 25% pre-issue eligibility threshold.
Sebi also permitted companies with preferential voting rights to list on IGP. Furthermore, the open bid trigger for companies listed on this website has been reduced from 26% to 49%. Sebi has also made it simple for companies to delist or move to the main board, which is either the NSE or the BSE.
IGP, which was introduced in 2019, seeks to provide technology-oriented startups or businesses with early-stage investors with a listing opportunity with a much more comfortable framework than the mainboard. There are currently no listings on the web.
According to experts, the new Sebi relaxations could help the IGP platform take off.
“Several significant improvements to the IGP platform have been proposed. This should make it easier for start-ups to collect funds,” said Rajesh Thakkar, Partner & Leader - Transaction Tax, BDO India.
Meanwhile, the Sebi board has made amendments to the delisting rules. Promoters will be forced to reveal their plans to delist in the future. In addition, independent directors would be expected to guide the minority shareholders of a delisted company by making a reasoned recommendation on the delisting proposal. Furthermore, Sebi has made various delisting timelines more effective.
Sebi has also provided some leeway in the reclassification of promoter shareholding. Promoters with less than 1% shareholding and no "power" would not be necessary to obtain shareholder approval for reclassification to ordinary shareholders. In addition, the time between the date of the board meeting and the date of the shareholders meeting has been shortened to make the process more effective.
Sebi has also updated the disclosure criteria for publicly traded firms. In the future, the regulator has stated that all video and audio recordings of analyst and institutional investor meetings must be made public within 24 hours. In addition, written minutes of such meetings must be made available within five days.
This alteration is intended to minimize information asymmetry. According to analysts, the new mandate will prohibit businesses from releasing confidential information to a limited group of investors, putting small shareholders at a disadvantage.
The Sebi has widened the formulation of dividend payout policy to include the top 1000 firms. The criteria to join a risk management committee has also been increased to include the top 1,000 firms. Currently, only the top 500 companies in terms of market capitalization were required to meet each of these criteria.
According to the regulator, the Responsibility and Sustainability Report (BRSR) will take the place of the Business Responsibility Report (BRR). BRSR will be obligatory for the top 1,000 businesses starting in FY23. The aim of BRSR is to improve the standard of disclosures, with a particular emphasis on the environment, social issues, and governance (ESG).
“New reporting standards are expected to increase transparency by requiring the disclosure of material ESG-related information, allowing market participants to recognize and evaluate sustainability-related risks and opportunities.” These specifications pave the way for India to take a big step forward in terms of ESG disclosures,” Sebi said in a press release.
“The proposed amendments have undoubtedly been granularized in order to improve clarity and provide consumers with the potential to make accurate competitive assessments between industries and sectors. The Securities and Exchange Board of India (Sebi) has set out a clear roadmap to strengthen the corporate governance system in the Indian securities market.” Said Sachin k Sheoran Director of HBF DIRECT LIMITED.
Sebi has also introduced amendments to the regulations regulating alternative investment funds (AIFs). It has given a description of a "startup" as defined by the government in order for angel funds to invest. Sebi has also excluded the list of restricted activities or sectors from the concept of a ‘venture capital undertaking.' This would give venture capital funds more versatility.
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