The business landscape of the world is fast changing with the huge penetration of internet and mobile telephony. For example the world's largest online seller Alibaba does neither actually maintain a huge inventory of goods nor does the global radio taxi operator Uber own a huge fleet of taxis. However these players have built a place under the sun on the basis of their internet and mobile based business models. India has witnessed the rise of a large number of start-up companies such as Flipkart, QuickHeal, InMobi, Paytm, to name a few, that have the potential to become the Amazons and Ubers of tomorrow. But the success of these domestic ventures will depend upon their ability to tap funds for expansion and growth. To bridge the gap, market regulator Securities and Exchange Board of India (SEBI) has released a discussion paper on regulations governing the listing and growth of local startups in software product development and e-commerce ventures in India.
Considering that the business dynamics of startups is quite different from traditional business, SEBI has outlined a number of sweeping changes in the regulatory requirements for them. Prominent among them is the proposal to do away with the need to come out with an Initial Public Offering (IPO) by startups in order to get listed on the Institutional Trading Platform (ITP). This is because angel investors and venture capital funds are the major investors in startups. Also startups wishing to tap capital markets through IPO need not necessarily be profitable but should demonstrate significant potential for future growth. The lock-in period for promoters has also been proposed to be six months as opposed to three years for conventional IPOs. At the same time in order to protect small investors from the risk inherent in startups, the investment limit in startup IPOs has been proposed to be fixed at Rs 10 lakhs while the minimum trading lot post listing would be Rs 5 lakhs.
A number of startups in India have managed to attract attention and raise venture capital funding. In order to lay the path for their future growth, SEBI has outlined a number of path-breaking proposals to get them listed on the Indian bourses. These proposals are expected to ease doing business and transform India into an attractive investor destination.