The Securities and Exchange Board of India (Sebi) floated a proposal for an 'Alternate Capital Raising Platform' on Monday to help start-ups and young entrepreneurs raise funds from institutions and high net worth individuals (HNIs) in the capital markets under a relaxed regulatory regime. The move is aimed at helping such companies raise funds within India and stop their flight to overseas markets.
Retail investors would be restricted from investing in such companies given the risks involved therein, according to the Sebi statement. The market watchdog said that adequate disclosures would be required to be made without hampering the capital-raising potential of such firms in new-age sectors like technology.
Sebi has sought public comments on the proposal by April 20. Under the proposed platform, money should be raised only from institutions and HNIs by new-age companies having innovative business model and belonging to knowledge-based technology sector.
On account of the risk involved in investing in such companies, it is proposed that retail investors be restricted from investing in such companies, Sebi said in the discussion paper on 'Alternate Capital Raising Platform'.
For want of a price discovery within the country, many of these companies plan to get listed in Singapore or the US. It is proposed that the 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 and new-age companies having innovative business model.
Besides, Sebi has proposed that capital raising would be allowed on the institutional trading platform. The platform will have two categories of investors-qualified institutional buyers (QIB) and non-institutional investors. It has been suggested that family Trusts may also be allowed to apply under the QIB category.
The listing on institutional platform would be for a period of, at least, one year. After that, the firm would have the option to migrate to main Board subject to compliance with eligibility requirements of the stock exchanges.