BENGALURU | NEW DELHI | MUMBAI:
Market regulator Sebi could ease rules that govern the public listing of shares by startups in India, a move that will remove one of the biggest hurdles cited by new-economy entrepreneurs who now look overseas while planning an initial public offer.
The Securities & Exchange Board of India could scrap norms that require companies to use proceeds from a public listing to build tangible assets or buy plant and machinery, according to a Reuters report, and the regulator is preparing to unveil a consultation paper later this month on listing norms for micro, small and medium enterprises, sources in the department of micro, small and medium enterprises told ET.
"This may include a clause to relook the prior profitability clause for new firms. The paper may also talk on IPO norms for small firms," said a government official. India's fast-growing Internet and technology product companies, whose main assets include intangible products and services and intellectual property, have found such stipulations onerous.
Indian online companies rushing to list abroad
Top Indian companies such as online retailer Flipkart and mobile advertising firm InMobi have domiciled in Singapore and software product think tank iSpirt estimates that nine of the top 30 business-to-business software product companies in India have already relocated to the US, Singapore and the UK. These 30 companies are worth about $6.2 billion (Rs 38,877 crore), employing almost 18,000 people.
Among those known to be preparing for an IPO in the coming months are online retailers Flipkart, Snapdeal and Infibeam, business-to-business portal India-Mart and marriage listings site Bharat Matrimony. Of these, Flipkart is almost certain to list in the US. Most of India's tech companies such as MakeMyTrip, Genpact, Rediff and EXL Services are listed on either NYSE or Nasdaq.
Several founders of technology startups had pressed for easier listing norms during an interaction with Sebi Chairman UK Sinha in Bengaluru in December 2014. An industry executive who advises Sebi on regulation and development of IPOs and other primary market segments, said a meeting took place on February 27 to work out a plan to make it easier for startups to list in India.
The decision to open public consultations was made at this meeting, he said. "We are delighted to see tangible progress being made and are optimistic about reversing the exodus of technology startups over time," said Sharad Sharma, co-founder of iSpirt, which facilitated the interaction with Sebi and has been a vocal proponent for change in current regulatory norms.