‘Non-traditional companies that are asset light offer added regulatory challenges’
Securities & Exchange Board of India (SEBI) chairman Ajay Tyagi on Wednesday called for an appropriate regulatory framework for listing of new age tech companies, also known as ‘growth companies’.
“Recently, there has been an increasing trend of new age tech companies coming out with their IPOs,” he said. “Such companies are characterised by their significantly different business model and are asset light in nature,” he observed.
“In 2021-22, out of the 23 IPOs on the main board with issue size over ₹1,000 crore, 5 were by companies with non-traditional business models. Such companies access capital markets both to provide exit to existing investors and to fund their growth ambitions,” he said, addressing the Association of Investment Bankers of India.
“These non-traditional companies offer additional regulatory challenges. Having an appropriate regulatory framework for listing of such companies is also important to attract fresh PE/VC investments in start-ups.”
Highlighting that typically the new age tech companies were loss making at the time of listing, Mr. Tyagi said the extant regulatory framework acknowledged that.
“Going forward, based on experience gained and stakeholders’ feedback, there would be learnings and the need for appropriate tweaking of regulations,” he said.
SEBI would soon be taking a view on a consultation paper on the subject that was shared with the public in November to seek their views, he added.
Stressing merchant bankers’ crucial role in ensuring market integrity, he said there were “various challenges… in the form of non-traditional business models of issuers, disclosure requirements for new age technology companies and valuation related apprehensions”.
“Appropriate pricing of the issue [for such firms] is a crucial aspect,” he added.
Emphasising that security markets had witnessed phenomenal growth in the last two years, Mr. Tyagi said during 2020-21, 344 issues raised about ₹2.3 lakh crore through issuance of equity securities in the Indian securities market.
Of this, 55 were IPOs which raised about ₹31,000 crore.
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