The SEBI Board’s decision to address the gaps in the existing framework for Innovators Growth Platform (IGP) is a step in the right direction. This platform was launched around three years back to facilitate information technology, data analytics and bio-technology companies to raise funds. But it has not elicited much response due to the rather stringent criteria regarding pre-issue shareholding. The Securities and Exchange Board of India has now tried to address this by reducing the period during which the issuer should have held pre-issue capital from two years to one. Non-institutional investors are now being allowed to hold 25 per cent of pre-issue capital, up from 10 per cent earlier. These relaxations may make more companies eligible to use the IGP. Similarly, the relaxation in open offer and delisting rules will ensure that listing on the exchange platform does not constrain the companies from selling stakes to other large investors. With the start-up ecosystem in the country growing at a rapid pace, giving easy exit to the investors in these companies through stock exchanges is the right approach. SEBI can ensure adequate liquidity on these platforms by asking exchanges to use market makers. Reducing the current trading lot size to ₹1 lakh can also attract a larger pool of investors to this platform.
The regulator has also accepted a long-standing demand of investors for disclosure of the proceedings of analyst or institutional investors meetings. Mandating that companies should upload audio/video recordings of such meetings on their website within 24 hours or the next trading day and the written transcripts within five working days, will serve investors well. The regulator can go a little further and mandate companies to disclose the conversation held in private meetings of company management with analysts and institutional investors as well. A lot of price-sensitive information is exchanged at such meetings, which needs to be disseminated to investors. The amendments to alternative investment fund regulations to give such funds more flexibility to invest in start-ups, units of other AIFs is also welcome as these funds can function as a viable channel for funding new businesses.
The requirement that a public announcement regarding delisting should be made by promoters and that the committee of independent directors should give their reasoned recommendation on delisting proposal will help investors decide on the right strategy regarding their holding. Setting out timelines for various activities in the delisting process and asking the promoter to specify an indicative price for delisting which shall not be less than the floor price, will also help in decision making.