‘Untraditional companies offering asset illumination add to regulatory challenges’
Securities and Exchange Board of India (SEBI) chairman Ajay Tyagi on Wednesday called for a suitable regulatory framework for listing of new age tech companies, also known as ‘growth companies’.
He said, “Recently, there has been an increase in the trend of new age tech companies bringing IPOs. “Such companies are characterized by their distinct business models and assets are light in nature,” he observed.
“In 2021-22, out of 23 IPOs on the main board with issue size of more than ₹1,000 crore, 5 were from companies with unconventional business models. Such companies access the capital market to exit existing investors and fulfill their growth ambitions,” he said while addressing the Association of Investment Bankers of India.
“These non-traditional companies offer additional regulatory challenges. It is also important to have an appropriate regulatory framework for listing of such companies to attract new PE/VC investments in start-ups.
Highlighting that the new age tech companies were generally making losses at the time of listing, Mr. Tyagi said that the existing regulatory framework has accepted this.
“Going forward, based on the experience gained and the feedback from the stakeholders, there will be a need for learning and appropriate change of rules,” he said.
He said Sebi would soon consider a consultation paper on the subject which was shared with the public in November to know their views.
Emphasizing the important role of merchant bankers in ensuring market integrity, he said that “there are various challenges … in the form of issuers’ non-traditional business models, disclosure requirements for new age technology companies and valuation concerns”. .
“fair pricing of the issue” [for such firms] There is an important aspect,” he said.
Emphasizing on the unprecedented growth in the security markets in the last two years, Mr. Tyagi said that during 2020-21, 344 issues raised around Rs 2.3 lakh crore through issuance of equity securities in the Indian securities market.
Of these, 55 were IPOs that raised around Rs 31,000 crore.
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