Sebi preparing new policy for start-up IPOs in 3-4 months

Mumbai: Securities and Exchange Board of India (Sebi) chairman U.K. Sinha said on Friday the capital markets regulator expected to have a new policy for initial public offerings for start-up companies in three to four months.

Reuters had reported this week Sebi was planning rule changes that will make it easier for home-grown start-ups to list their shares on local bourses, citing sources involved in the process.

Sinha, in an interaction with reporters, also said Sebi was in talks with the Reserve Bank of India about a new policy for wilful defaulters.

Under Indian law wilful defaulters are classified as companies or individuals who deliberately thwart repayment of dues to lenders.

The regulator also raised concern over the lacklustre real estate investment trusts (REITs) market.

Despite efforts by the market regulator to allow the launch of REITs and create a market for them in India, there is a little enthusiasm towards these instruments so far, Sinha said.

“In 2013, Sebi floated a discussion paper on REITs and, in 2014, launch of Reits was allowed in India. Initially, there were taxation issues, but in the budget last month the government announced that there will be no capital gains tax on REITs as long as a securities transaction tax is imposed on transactions of REIT units. Still the enthusiasm is very low,” Sinha said.

Sinha said the market regulator will be happy to take suggestions from experts and researchers on additional steps to create a vibrant market for REITs in India.

REITs are proposed as listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors and list them as a trust. REITs will also give foreign investors a chance to invest in lease rental generating assets, an asset class otherwise prohibited for foreign investments.

As part of budgetary proposals, the government rationalized the capital gains regime for sponsors of REITs and infrastructure investment trusts (InvITs).

REITs and InvITs are collective investment vehicles that have an important role to revive construction activity and a large quantum of funds are locked up in various completed projects, which need to be released to facilitate new infrastructure projects to take off, finance minister Arun Jaitley said.

“I, therefore, propose to rationalize the capital gains regime for the sponsors exiting at the time of listing of the units of REITs and InvITs, subject to payment of securities transaction tax (STT). The rental income of REITs from their own assets will have pass-through facility,” Jaitley said in his budget speech on 28 February.