With an aim to help companies set up by professionals and qualified entrepreneurs to tap capital market, the Securities and Exchange Board of India (Sebi) has allowed them to get help from private equities (PEs) and other funds to meet share lockin requirements.
According to Sebi regulations, promoters are required to lock in at least 20-per cent stake in the company for at least three years after allotment of shares in initial public offer (IPO).
Besides, any holding in excess of this minimum 20 per cent, the promoter's stake is required to be locked in for one year.
To encourage professionals and technically qualified entrepreneurs who are unable to meet the requisite 20 per cent contribution by themselves as promoters, the regulator has now decided to allow such start-up promoters to meet this requirement with help of Sebi-registered Alternative Investment Funds (AIFs). AIFs are a newly approved class of investors which include PEs, SME, infrastructure, venture capital funds among others.
However, the contribution of these AIFs would be capped at 10 per cent to meet the promoter share lock-in guidelines.
The proposal has been approved by the Sebi board and would be soon incorporated into the relevant guidelines.
Sebi is of the view that such a step would encourage the professional to tap the capital market to raise funds. In another development, the market regulator has allowed the promoter entities to hit the market with successive institutional placement programme (IPP) and offer-for-sale (OFS) schemes with a two-week gap to help promoters dilute stake to meet the minimum 25-per cent public holding norms.
IPPs and OFSs are two avenues made available to the promoters by Sebi to help them dilute their stake and meet the guidelines of 25 per cent minimum public shareholding in private firms and 10 per cent in public sector undertakings.