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2015-03-31

SEBI proposes new fund-raising platform for start-ups

Under the \'Alternate Capital Raising Platform\', start-ups in the software product development and eCommerce areas will be allowed to raise money.

Sebi has proposed an 'Alternate Capital Raising Platform' to enable start-ups and young entrepreneurs raise fund from institutions and HNIs from the capital markets.

"However, retail investors would be restricted from investing in such companies, given the risks involved therein. While the adequate disclosures would be required to be made without hampering the capital-raising potential of such firms in new-age sectors like technology," said Securities and Exchange Board of India (SEBI).

"On account of the risk involved in investing in such companies, it is proposed that retail investors be restricted from investing in such companies", added SEBI.

Under the 'Alternate Capital Raising Platform', start-ups in the software product development and  eCommerce areas will be allowed to raise money and that to on the Institutional Trading platform (ITP).

Only Qualified Institutional Buyers (QIB) and Non-Institutional Investors (NII) will be available in the 'Alternate Capital Raising Platform'.

The duration for listing process on institutional platform will be one year and then the company will be given the flexibility to migrate to main board subject to meet the eligibility criteria of the stock exchanges. 

"Companies where any person (individually or collectively with persons acting in concert) holds 25 per cent or more of the pre-issue share capital should access capital through the existing main board," mentions SEBI.

The SEBI's proposal has also put restriction to the raising process by allowing them only to raise funds for corporate purpose.

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