The Securities and Exchange Board of India (SEBI) at its board meeting have decided to ease rules linked to profitability, use of funds and valuation methodology, Chairman U.K. Sinha told reporters in Mumbai, bloomberg reports.
India is experiencing ecommerce growth, with UBS AG predicting the market to grow 10 times to USD 50 billion by 2020. Yet, the industry has been fueled almost entirely by capital from overseas, including money from US-based investment firm Tiger Global Management LLC and billionaire Masayoshi Son’s Softbank Corp. The new rules could potentially lure Indian investors, said Gopal Srinivasan, chairman at TVS Capital Funds. The minimum investment in startups should be (USD 15,700), Sinha said, cited by the source.
Institutional investors, including mutual funds such as HDFC Asset Management Co. that manage a combined 12 trillion rupees (USD 187 billion) must hold at least 25% of the pre-issue capital of technology startups, while for others, the requirement has been set at 50%.
The lock-in period for founders will be six months instead of the three years for regular companies, and bourses will have a separate trading platform for startups. Current norms for initial public offerings include several “onerous conditions” that make it unattractive for startups to list in India, Praveen Chakravarty, an angel investor and another member on Sebi’s panel said, cited by the source.
Sebi will also decide on crowdfunding norms in India in what may be a framework along the lines of the US Jumpstart our Business Startups Act or JOBS Act passed in 2012. That could provide a platform for startups to raise initial seed funding prior to approaching angel investors or venture capital firms, said Abid Hassan, chief operating officer at MobME Wireless Ltd. and a member of the Sebi startup panel, the source cites.
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