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Start-up norms fail to woo promoters? 
(Fri, 17 Jul Pre-Open) 
 
India's start-up activity has been booming since some time now. A number of start-ups in India have managed to attract attention and raise venture capital funding. Large part of these funds is raised abroad and these funds are still curiously scouting for their next India deal.

An article in The Economic Times highlights about the growing magnitude in the fund raising of these start-ups. The start-ups, mostly internet businesses, have raised over Rs 509 bn in venture funding since 2012. This is far more than the amount raised by the mature companies going public that is around Rs 134 bn through initial public offerings (IPOs) for the same period.

With the increasing activity in these start-ups and to make the capital funds domestically available, the capital market regulator had recently announced a new set of relaxed norms for start-ups to list on a proposed Institutional Trading Platform (ITP).

As per the proposal in the ITP guidelines, SEBI is has relaxed the disclosure norms. Importantly, the regulator has removed profitability clauses for such start-ups. Further, they have set a minimum investment floor of Rs 10 lakh. Over and above the lock-in period, minimum allottees and so on are part of these norms. The regulator also has kept small, retail investors out. The companies opting to list themselves can shift to stock exchanges in three years, given they are at par with the norms with the exchanges.

However, these relaxations do not seem to be very enticing for the community. Some promoters still believe that these norms are not at par with the international standards and the regulator needs make them more relaxed to encourage startups to list on this platform. According to some experts, while the profitability norm has been relaxed for initial years, it still remains at the core of the system.

In our view while, these norms might make difficult for the start-ups to access the funds from the domestic market, however when the question of accessing capital markets comes into play, protecting the interests of investors also becomes extremely important. Given the business dynamics of these new-age start-ups, SEBI has outlined a number of sweeping changes in the regulatory requirements for them. However it appears to be quite clear that investors' interest is not relaxed.

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