NSE in talks with Sebi to tweak start-up listing norms

New Delhi: The National Stock Exchange (NSE) plans to ease listing norms for so-called new-age companies, in an effort to revive its dedicated start-up listing platform, which has struggled to generate interest.

NSE is in discussions with markets regulator Securities and Exchange Board of India (Sebi) to tweak some of the conditions for listing through the platform to make it more attractive to start-ups and investors, Vikram Limaye, NSE managing director and chief executive, said in an interview. Limaye did not provide a timeline for when the changes may be notified.

He said the domestic investor community has expanded over the years and become open to investing in new-age technology companies.

“The timing also seems right because in the last few years, a lot of money has been invested in start-ups and some investors in these companies may want to exit in the next 12-14 months…it is only appropriate for them to list in India and give an opportunity for the domestic investors to participate in their growth,” he said.

NSE has been pitching public markets to start-ups for several years. It launched a special platform called Emerge ITP (Institutional Trading Platform) in 2013 wherein start-ups could offer shares to investors without going through a full-fledged initial public offering.

But some conditions in the ITP framework have been limiting its scope. The biggest constraint is that only start-ups with paid-up equity capital of less than Rs25 crore, or in other words, who have raised external funding of not more than $4 million—are eligible, leaving a whole range outside the purview of the platform.

Other conditions include annual sales not exceeding Rs100 crore, and that at least 25% of the pre-issue share capital must be held by select institutional investors.

Only 11 firms have listed on Emerge ITP so far, according to the latest figures on NSE.

In comparison, NSE’s Emerge—another platform meant for small and medium enterprises launched in 2012—has done rather well. Forty-four small firms have listed on this platform, of which 31 listed in 2016-17 raised more than Rs363.23 crore, according to NSE’s latest annual report.

“The purpose of Emerge ITP is to list smaller companies. The Rs300-400 crore IPO fundraise is for much larger companies that have Rs1,000 crore-kind of valuation. This is for companies that have, say, Rs250 crore valuation and are looking to raise Rs50 crore from the IPO market,” said Sunil Goyal, founder and managing partner at YourNest, an early-stage investment fund.

Investors are skeptical about whether NSE’s renewed efforts to promote its start-ups platform would lead to a significant increase in offerings.

“If the stock market appetite is more for start-ups, it is not in these specialized secondary markets, but in general stock markets—NSE and BSE,” said Shripati Acharya, managing partner at venture capital firm Prime Venture Partners. “From our perspective, a more meaningful moving of the needle is, if we actually make it easier for tech companies to directly list in the market, because there you will get the attention. Going into these secondary markets, listing and getting some liquidity is not that relevant to us.”

Indian investors don’t have enough appetite for start-up IPOs, said Sarath Naru, managing partner at Ventureast. Additionally, the ecosystem of stock analysts and bankers that is needed for any successful IPO is missing for start-ups in India, he said.