To help start-ups and young entrepreneurs raise funds, the Securities and Exchange Board of India, proposed an ‘Alternate Capital Raising Platform’, wherein such firms can raise money from institutions and high net worth individuals (HNIs) from the capital markets under a relaxed regulatory regime.
The move is aimed at helping such companies raise funds from within India and stop their flight to overseas markets.
It is proposed that the new platform for raising money within the country will be initially made applicable to companies which are in the area of software product development, e-commerce, new-age companies having innovative business model.
The proposed platform will have two categories of investors —qualified institutional buyers (QIB) and non-institutional investors (NII).
According to SEBI’s proposal, companies where any person (individually or collectively with persons acting in concert) holds 25 per cent or more of the pre-issue share capital should access capital through the existing main board.
As per the proposal, the entire pre-issue capital should be locked-in for six months for all shareholders.
The basis of the issue price should include disclosures, other than projections, as deemed fit by the issuers accessing the market on the institutional platform to enable investors take informed decisions.
These changes in the existing framework would be applicable to all issuers irrespective of the listing on main board or the institutional platform.
It suggested to extend the definition of QIBs to include important NBFCs and family offices/trusts.
Further, any other entity registered with SEBI having a minimum net worth of Rs.500 crore should also be considered as a QIB.