At a time when many companies are looking to list on the stock exchanges through an initial public offer (IPO), the Securities and Exchange Board of India (SEBI) has relaxed the norms related to the lock-in of shares held by promoters of such companies.
The board of the capital markets regulator, which met on Friday, decided that the minimum 20 per cent stake of promoters that is locked-in for three years post the IPO will now remain locked-in for only eighteen months, subject to certain conditions.
Further, the lock-in period for the promoter shareholding in excess of the minimum 20 per cent has also been reduced from the existing one year to six months.
The regulator has, however, laid down certain conditions in terms of the reasons for raising money for the reduced lock-in period to be applicable.
The regulator has also provided relaxations to the non-promoter shareholders of IPO-bound companies with the lock-in of pre-IPO allotments brought down to six months from the date of allotment. Currently, such allotments are locked-in for one year.
Interestingly, entities like Venture Capital Fund, Alternative Investment Fund (AIF) of category I or Category II along with a Foreign Venture Capital Investor can now sell their shares after six months of acquisition instead of the current stipulated one year.
This assumes significance as many start-ups and unicorns are looking to list in the Indian stock market and the list of their shareholders typically comprise venture capital and private equity players along with AIFs.
While Zomato listed recently on the stock exchanges, the near future would see entities like PayTM, Mobikwik, Nykaa and PolicyBazaar, among others, launch their IPOs. The IPO of CarTrade Tech, which operates CarWale, will open for subscription next week.
Shift from Promoter Concept
The board of the regulatory body gave its in-principle approval for a shift from the promoter concept to ‘person in control’ or ‘controlling shareholders’ regime, which is the norm in most of the developed markets.
The watchdog will engage with other regulatory bodies and deliberate on this matter further before suggesting a roadmap for the shift to the new system.
Recently, SEBI chairman Ajay Tyagi had said that the regulator is mulling on this issue as even though there are many instances of concentrated ownership in India, many of the new-age entities that have VC or PE funding have a diversified shareholding with professional management and no promoters as such.
Among other decisions, the board of the capital markets regulator also relaxed the disclosure obligations for entities that acquire or sell shares aggregating to 5% in a year or any change in excess of 2 per cent thereafter. The obligation for disclosures in such cases would be done away with effect from April 1, 2022 as system-driven processes disseminate such information on the stock exchanges.
The regulator has also done away with the provision that entities that acquire between 2 per cent and 5 per cent in a stock exchange have to get a post-facto approval from SEBI to ensure that they comply with the ‘fit & proper’ criteria.
SEBI has also simplified and rationalised certain regulatory framework for AIF in terms of investment norms. The regulator has also approved the merger of SEBI (Issue of Sweat Equity) Regulations and SEBI (Share Based Employee Benefits) Regulations into a single regulation called the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.