India is trying to create its own Nasdaq as whole host of startups get ready for IPO

• India’s early tech companies like online travel aggregator platforms MakeMyTrip and Yatra, had listed in the Nasdaq, years ago owing to the US’ friendly moves for technology companies.
• Now, SEBI may want to replicate the success of the American exchange, with India's Innovators Growth Platform.
• The easing of listing regulations have come at a time when a whole host of Indian startups like Zomato, Delhivery, Nykaa are headed for IPO.
• Check out the latest news and updates on Business Insider.

With the Innovators Growth Platform (IGP), India’s stock market regulator Securities and Exchange Board of India (SEBI) may be trying to replicate the success of Nasdaq. The American exchange played an important role in helping technology startups, at the time, like Google, Facebook, Apple, Amazon and Netflix among others, to become the giants they are today.

India’s early technology companies like online travel aggregator platforms MakeMyTrip and Yatra, had listed in the Nasdaq, many many years ago owing to the US’ friendly moves for technology companies. Even now, companies like ReNew Power and reportedly Grofers, are headed for the US public markets through a special-purpose acquisition company (SPAC).

There are other companies like Zomato, Delhivery, and Nykaa plan their initial public offering (IPO), SEBI has initiated a bunch of measures, much like Nasdaq, that would make it easier and, therefore, encourage startups to make their market debut in India. "Everyone’s eager that the IGP can actually become like the Nasdaq of India,” Siddarth Pai, founding partner at 3one4 Capital and co-chair of the regulatory affairs committee at the Indian Venture Capital Association (IVCA) told ET.

Here are some of the changes introduced by the SEBI

– The holding period for pre-issue capital has been brought down from the existing two years to one year. This step will allow startups to make a discretionary allotment to eligible investors—a facility available to companies that list on BSE and NSE.
– It has allowed for startups, that are headed for an IPO, to allocate up to 60% of the issue size to any eligible investor with a lock-in of 30 days on such shares. This is important as currently an issuer company isn’t allowed to make discretionary allotment.
– An investor’s pre-issue shareholding can be considered for 25% of the pre-issue capital, instead of the current 10% limit.
– It has also officially allowed Differential Voting Rights for listed companies in its board meeting which was held today. With Differential Voting Rights, companies whose promoters hold skill and talent to run the business can sell shares giving away their control in the company.

A great idea waiting for the execution test

Market participants are excited about the potential of this new platform. “Sebi is finally giving cognisance to the fact that IGP is going to be a mainstay for more sophisticated investors and hence [needs] a more light-touch regulation," Pai added.

But the new platform still has to go through the test.

“Bankers and potential issuers will scrutinise this route at more length before deciding to take this route, as currently, most startups focus is to list on the mainboard. The feasibility and traction of the IGP platform are yet to be tested and the benchmark for the same will get established by the first couple of contenders who chose to go through this route,” said Ankur Bansal, Co-founder and Director, at BlackSoil, an investment firm.

Madhur Singhal, Managing Partner & CEO, Praxis Global Alliance believes that the new rules will encourage startups to consider local listing, especially startups that are profitable and are already accessing the public markets and reaping success as shown by the recent IPO of Nazara. But still, there’s a long way to go.

“While it is a step in the same direction, we are still far away from where US bourses are. We need a comprehensive framework for listing businesses that might still not be profitable. Several friction points like the ESOP framework and Angel investor tax treatment still need to be addressed for SEBI's vision to be fully realized,” Singhal told Business Insider.

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