Market regulator Sebi has issued detailed guidelines, including on eligibility criteria, for listing of start-ups and small and medium enterprises (SMEs) on stock exchanges without an initial public offer (IPO).
The guidelines follow notification of new norms by Sebi earlier this month for permitting listing of start-ups and SMEs on Institutional Trading Platform (ITP) of SME Exchanges.
Through this new route, the SMEs and start-up companies would not need to make a public offer of securities for getting listed in the stock market.
The move would help SMEs and start-ups raise capital from the securities market during their early stages of growth, as lack of exit opportunities in case of unlisted companies come as a major hindrance for small companies to get capital.
As per the new guidelines issued today, a company would be eligible for such listing if it has not completed a period of more than 10 years after incorporation and its revenues have not exceeded Rs 100 crore in any of the previous financial years, among others.
In addition, the company should have got an investment of at least Rs 50 lakh by an alternative investment fund, or a venture capital fund, or by a merchant banker, or an angel investor, or a specialised international multilateral agency, or a public financial institution, among other such investors.
As per rules regarding capital raising by SMEs, the norms said a company may raise funds through private placement or through a rights issue.
"In case of a rights issue, there shall be no option for renunciation of rights and the company seeking to get listed on ITP shall agree to make necessary amendments to its articles of association to this effect," Sebi added.
The market regulator has asked the promoters of SMEs not to hold less than 20 per cent of the post listing capital of the company and the same shall be locked-in for a period of three years from date of listing.
According to the norms, an SME would be required to exit the ITP within 18 months if it has been listed on the platform for a period of 10 years or it has paid up capital of more than Rs 25 crore or company has revenue of more than Rs 300 crore in the last audited financial statement, among others.
The company can also take a voluntary exit if it has the approval from its majority shareholders.
Moreover, a company would be removed from the platform if