Startups seek change in listing requirement
The startups want review of promoter shareholding norm; Ola, Lenskart, PolicyBazaar, Oyo among companies in talks with Sebi.
The companies, which include ANI Technologies that owns and operates ride-hailing app Ola, eyewear solutions company Lenskart and online insurance policy aggregator PolicyBazaar, want the Securities and Exchange Board of India (Sebi) to either remove the requirement of promoters holding at least a 20% stake in the companies that they have founded, or consider it on a case-by-case basis.
The founders of these companies, mostly valued at $1 billion and upwards, will be meeting Sebi policymakers over the next few weeks, company sources told ET.
“A minimum promoter holding requirement of 20% does not exist in other markets such as the US or China. Therefore, we are hopeful that Sebi will consider it to the extent of the promoters’ holding,” an industry representative, who has been in conversations with regulators, said on the condition of anonymity.
Ola, PolicyBazaar and Lenskart did not reply to ET’s email queries on the development. Lobbying organisation IndiaTech, which represents a number of the companies, also declined to comment.
An email query to Sebi seeking comment did not elicit a response.
Sebi’s Holding Norm Proving Restrictive
For startup founders whose holdings in their companies typically range between the high single digits or in the low-to-mid-teens, the Sebi stricture to maintain a 20% stake in order to list on Indian bourses is proving restrictive. For example, the founders of Lenskart, Ola and PolicyBazaar have stakes ranging between 4% and 15% in their respective ventures, following dilution in their holdings after multiple rounds of funding.
Executives argue that Sebi’s suggestion that promoters make up for the shortfall from their respective investors when their own stakes fall short of the 20% requirement, is also not a viable option.
“No risk capital investor will agree to have their money locked in for a three-year period. The entire idea is to earn returns, and having capital tied up for such a defined term is simply not an option,” a startup executive told ET.
Separately, startups are seeking greater clarity regarding the critical net worth clause required for differential voting rights (DVR). Indian startups have been fighting for these rights that allow founders to have greater control over their companies, in spite of owning minority stakes.
Currently, Sebi requires that founder-promoters, or superior voting rights shareholders, should be a part of the promoter group, whose collective net worth does not exceed Rs 500 crore. In response, startup founders have asked that an amendment to the clause be made to clarify the metrics for calculating their net worth.
The group has asked that the requirement be clarified as holding stock in unlisted firms, rather than listed entities, since this clause would make almost every founder of a Unicorn internet startup ineligible to issue DVRs and list on the domestic exchanges.