India
plans IPO rule changes to lure homegrown start-ups:
sources
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[March 18, 2015]
By Himank Sharma and Sumeet Chatterjee
MUMBAI (Reuters) - India's market regulator
is planning rule changes that will make it easier for homegrown
start-ups to list their shares on local bourses, sources involved in the
process said, helping domestic investors to bet on the country's booming
online economy.
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While many of India's largest online players are set to list in the
coming year or two as they mature, none is currently expected to
make its market debut at home. That could mean a significant loss
for local exchanges and investors: marketplace Flipkart has prompted
valuations of as high as $11 billion.
To remedy this, sources said, the Securities and Exchange Board of
India (SEBI) is considering easing rules on mandatory disclosure for
the draft prospectuses of Internet-based firms.
One of the main items that could be scrapped is the need to detail
the use of proceeds from the initial public offering of shares, they
said. This is an obstacle particularly for technology start-ups,
that don't usually use the cash to invest in plants, factories or
mines.
"A lot of them operate without any tangible assets," said one of the
sources directly involved in the process.
"That creates an issue when declaring the use of proceeds (in the
draft prospectus)."
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The source said other issues including accounting and financial
reporting practices used by the e-commerce firms were also under
review to ease pre-IPO disclosure requirements.
An official at SEBI said separately that the regulator's chairman,
U.K. Sinha, has held meetings with startup executives and bankers to
discuss the proposed changes.
All the sources declined to be named, as they were not authorized to
speak to the media given the new rules are still being finalised. A
spokesman for SEBI did not respond to Reuters calls and e-mail
requesting comment.
India is seeing a boom in private investments in start-ups and a
large number of funds including Temasek Holdings [TEM.UL],
U.S.-based Accel Partners and Japan's SoftBank Corp have invested
billions of dollars in online firms.
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Most of these private equity investors are expected to exit from
their portfolio companies through share listings, putting a
spotlight on the sector and the potential IPO candidates.
Many Indian start-ups including online marketplaces Flipkart and
Snapdeal are expected to be preparing for IPOs, hoping to raise
capital and to give some of their early backers an opportunity to
cash in on investments worth billions of dollars.
But bankers are expecting them to explore overseas markets, mainly
U.S. exchange operator NASDAQ OMX Group Inc. That is due to
regulatory requirements in India as well as the difficulty in
finding valuation benchmarks on exchanges on which no comparable
rivals trade.
Investment bankers said the SEBI rule changes, if implemented, may
encourage some of these companies to consider a listing at home,
giving Indian investors the chance to put money into a sector that
is expected to boom in the next few years as more Indians shop, live
and work online.
(Reporting by Himank Sharma and Sumeet Chatterjee; Editing by Clara
Ferreira Marques)
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