Fund raising is always a crucial task for start up because how unique idea you have, that ultimately requires funds. Therefore, start up entrepreneur searches investors who are ready to invest in their ideas.
Listing of securities provides a unique platform to raise funds, but SME listing is quite different from normal listing procedures.
Since only public limited companies can list its securities, therefore SME listing is a unique stage for Start up incorporated as public company.
For further development of securities market, especially for Indian small and medium enterprise (“SME”), Securities and Exchange Board of India (“SEBI”), watchdog of Indian securities market, recently permitted listing of SMEs without following any cumbersome procedures of an Initial Public offering (“IPO”). Therefore, SEBI introduced new chapter to SEBI (Issue of Capital and Disclosure Requirement) Regulation, 2009 (“ICDR Regulation“), which is SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 (“ITP Regulation”).
Some of the key facets of ITP regulations:
- Paid up capital criteria: the paid up capital of the company has not exceeded 25 crore rupees in any of the previous financial years;
- Audited Financial Statement: The company has atleast one full year’s audited financial statement, for immediately preceding financial year at the time of making listing application.
- Minimum Promoter shareholding and lock in: Atleast 25% of post listing capital shall be held by the promoters which shall have a lock – in period of 3 years from date of listing.
- Demat: All specified securities of the SME shall be in dematerlised form.
Start ups come up with innovative ideas, so to foster the development of start up SMEs listing platform is very important. This will not only create access to funds, but enhance the visibility of start up.
Of the key criteria of SME listing, it is pertinent to note that regulation requires the participation of key investor like, angel investor; venture capitalist etc. so that informed decision can be made.
As a concluding remark, ITP regulation provides incredible and efficient market place to narrow down the gap between sophisticated investors and emerging corporate in India.