To help startups to move from the Innovators Growth Platform of stock exchanges to the main board for regular trading, regulator Sebi is planning a new set of norms to allow them to shift after one year of trading and expanding their shareholder base to at least 200.
However, the regulator is of the view that if companies listed on the IGP are allowed to be traded in the regular category of main board without following a stringent criteria, it may be misused to bypass the rigorous route of coming up with a main board IPO, officials said.
Any company desirous of getting listed on the main board of stock exchange for regular trading of their shares need to follow stringent disclosure and eligibility norms and launch an initial public offer (IPO). But, the rules are much more relaxed for the startups looking to list their shares on the new IGP, where trading activities are relatively restricted.
A detailed set of norms were finalised by Sebi’s board in December 2018 and the regulator was asked at that time to decide on the requirements of migration of trading of shares from IGP to the main board in consultation with stock exchanges and other stakeholders.
Officials said Sebi discussed these norms with its own Primary Market Advisory Committee as well as the two leading bourses BSE and NSE, pursuant to which a discussion paper was issued for public comments in May this year.
After taking into account comments received from merchant bankers, industry bodies, stock exchanges and others, Sebi has now finalised a detailed set of draft norms which would be presented for its board’s approval later this month.
As per the proposal, a company would need to be listed on the IGP for at least one year for migration and have at least 200 shareholders at the time of migration.
Besides, the company, or any of its promoters and directors should not have been barred from accessing the capital market. They should also not have been classified as wilful defaulters or fugitive economic offenders. Also, none of the promoters or directors should be associated with a company barred from the capital market.
Officials said some suggestions were received that the minimum number of shareholders for migration should be reduced to 50 or 100, as startups do not have a large investor base and a lower threshold in the initial phase would help the platform attract more companies and investors.
However, Sebi is of the view that the threshold should remain at 200 shareholders to ensure liquidity.
The proposed norms also require the company to have net tangible assets of at least Rs 3 crore, calculated on a consolidated basis, in each of the preceding three years, of which maximum 50 per cent can be held in monetary assets.
For migration, the company also needs to have an average consolidated operating profit of at least Rs 15 crore during the preceding three years, with an operating profit having been recorded in all the three years. The net worth threshold has been proposed at Rs 1 crore for each of the three preceding years.
In case the company has changed its name within the last one year, at least 50 per cent of its consolidated revenue for the preceding one full year should have been earned from the activity indicated by the new name.
A company in non-compliance of these financial thresholds would need to have 75 per cent of its capital held by investors classified as Qualified Institutional Buyers (QIBs).
A restatement of accounts would be required for companies getting listed for the first time by applying uniform accounting policies, but it would not be applicable for migration of the IGP-listed companies.
During the public consultation, there were demands for relaxing these norms on the ground that startups were early growth stage companies with limited track record and they might opt to go for private equity and wait to meet for the eligibility criteria for listing on the main board at a later stage.
However, Sebi has opined that trading on regular main board entails trading by retail investors, in addition to other investors, while the eligibility criteria also needs to be stringent to ensure a certain degree of credibility.
Sebi has also proposed that the promoters’ minimum contribution should be 20 per cent of the total capital and it should be locked in for at least 3 years from the date of grant of approval for trading on main board.
In case of a shortfall, a maximum of 10 per cent can be contributed by alternative investment funds, foreign venture capital investors, scheduled commercial banks, public financial institutions or insurance companies without being identified as promoters, but subject to similar lock-in conditions.
Any excess promoter holding above 20 per cent would be locked in for one year.
The lock-in condition would not apply to companies that have been listed on the IGP for three years or more.
Sebi had received suggestions to relax these norms too, but the regulator is of the view that the minimum promoter contribution and lock-in provisions are in line with those prescribed for the main board IPOs.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
324 stocks hit lower circuit on BSE; Reliance Capital tumbles 24% intra-day
As many as 324 stocks or 12 per cent of the total 2,597 traded stocks on the BSE were locked in the lower circuit and saw only sellers on these counters today. Of these, around 104 stocks belonged to the ‘X’ group, 81 stocks were from XT group, followed by B group (67), T group (44) and Z group (16), the exchange data shows.
Eight stocks – Thomas Cook India, Sterlite Technologies, CG Power and Industrial Solutions, Eveready Industries, Jet Airways India, Bliss GVS Pharma, Reliance Communications and Indiabulls Integrated Services – from the S&P BSE 500 index hit their respective lower circuits during the day.
“The delay in addressing concerns of foreign investors regarding taxation and slowdown in the economy is seeing foreign selling continue with over US$2.5 billion being the collateral damage since the budget,” IIFL Securities said in a client note.
Thomas Cook India (Rs 129), Sterlite Technologies (104) and Housing Development and Infrastructure (Rs 7) were frozen at 20 per cent lower circuit limit on the BSE.
Reliance Capital tanked 24 per cent to Rs 30 in the intra-day trade. It finally settled 20 per cent lower at Rs 32 on the BSE. Stocks trading on future & option (F&O) segment, don’t have any circuit limits.
Market Ahead, August 22: All you need to know before the Opening Bell
Investors are expected to react to market regulator Sebi’s board decision to ease requirements for foreign portfolio investors (FPIs).
The regulator said FPIs would no longer be required to meet the ‘broad-basing’ criteria, under which at least 20 investors were required to establish a fund. It also said, it would rationalise the framework for issuance of participatory notes (P-notes), an instrument once very popular with overseas investors.
That apart, market participants will take cues from the minutes of the RBI’s August monetary policy committee (MPC) meet released yesterday that showed that all three internal members had voted unanimously for a cut of 35 basis points to support economic growth.
Besides, global cues, rupee trajectory, foreign fund flow, stock-specific action, and oil price movement would be on investors’ radar.
Now, let’s see what global markets indicate for Sensex and Nifty.
Asian shares edged higher on Thursday, taking cues from gains in the US stocks. MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1%, Japan’s Nikkei added 0.4% and Australian shares 0.3%.
At 8:00 am, SGX Nifty, the Singaporean Exchange for Nifty Futures, was down 22 points, indicating a flat to negative start for domestic indices.
On Wednesday, the Sensex settled 0.72 per cent lower at 37,060 level, and the Nifty50 closed at the 10,919-mark, down 0.89 per cent.
The Rupee closed at 71.55, up 16 paise against the US dollar.
And, before we wrap, here’s a look at the top headlines that are likely to move markets–
>> The government, on Wednesday said, it has set no deadline to ban the production of petrol, diesel vehicles or for automobile manufacturers to switch to EVs
>> Government, on Saturday, is expected to hold meeting with economists to discuss economic slowdown.
At last, stock recommendation for the day by Tradebulls Securities–
The brokerage recommends selling Tata Steel at current levels. The stock is expected to drift lower till Rs 321 price confluence zone. Hence, the stock can be sold with stop above previous sessions high of Rs 358.
Charticle: Where FPIs, MFs increased/decreased their stake in June quarter
Equity markets witnessed some sharp upmove in the first half of the calendar year 2019 (CY19), first on the anticipation of the return of the Narendra Modi-led government to the power and then, hopes of desired reforms from the continuing government. The period did see benchmarks, S&P BSE Sensex and the Nifty50, touching their all-time highs of 40,312 and 12,103.05, respectively on June 4, 2019. However, the rally was short-lived as a couple of market unfriendly Budget proposals on July 5 triggered downward trajectory in the stocks.
That said, for the quarter ended June 30, 2019 (Q1FY20), the Nifty50 index has given a modest return of around 1.50 per cent while the S&P BSE Sensex of BSE has gained nearky 2 per cent. The S&P BSE 200 index has remained flat with just 0.38 per cent gain, ACE Equity data show.
During the period, overseas investors (FPIs) infused a total of Rs 31,700 crore in the equity market and FPI ownership in the BSE200 index increased to $444 billion in the June quarter from $433 billion in the March quarter, said a recent report by Kotak Securities.
Top sectors that witnessed FPI buying included financials, insurance, oil, gas and telecommunication services.
Among individual stocks, Gruh Finance, Mahindra Logistics and Godrej Properties saw substantial sequential increase in FPI holdings while they sold large stakes in YES Bank, Dish TV and DLF. Mutual Funds, on the other hand, increased their stake in Emami, Shriram Transport and Vodafone Idea and reduced stake in India Cements, Apollo Tyres and YES Bank, as per the report.
Here’s a look at the top five stocks and sectors where FPIs and MFs increased or decreased their stake in June quarter –
Top five companies where FPIs raised their stake include Gruh Finance, Mahindra Logistics, Godrej Properties, Shriram Transport and SBI Life Insurance while top firms where FPIs decreased their stake during the quarter under review include YES Bank, DishTV, DLF, Escorts, Indiabulls Housing.
Top five companies where MFs increased their holding were Emami, Shriram Transport, Vodafone Idea, BHEL and DCB Bank. On the flip side, they reduced their holding in companies such as India Cements, Apollo Tyres, YES Bank, Graphite India, PVR.
Top five sectors which caught FPIs’ fancy were telecom, diversified financials, insurance, oil, gas & consumable fuels, electric utilities, capital goods. Information technology (IT) services, construction materials, banks, pharma, consumer durables are the top sectors that they were underweight on.
MFs’ bought Telecom, banks, pharma, consumer staples and construction materials during the said period whereas they lowered their investments in Oil, gas & Consumable fuels, Fertilizers and agriculture, Electric Utilities, Gas Utilities, IT services.
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