SEBI allows PE help to start-up IPOs for lock-in requirement

SEBI allowed professionals and qualified entrepreneurs to get help from private equity and other funds to meet share lock-in requirements

New Delhi: With an aim to help companies set up by professionals and qualified entrepreneurs to tap capital market, market regulator Securities and Exchange Board of India (SEBI) has allowed them to get help from private equity (PEs) and other funds to meet share lock-in requirements, reports PTI.


As per regulations of SEBI, promoters are required to lock-in at least 20% stake in the company for at least three years after allotment of shares in initial public offering (IPO).


Besides, any holding in excess of this minimum 20% promoter stake is required to be locked in for one year.


To encourage professionals and technically qualified entrepreneurs who are unable to meet the requisite 20% contribution by themselves as promoters, the regulator has now decided to allow such start-up promoters to meet this requirement with help of SEBI-registered registered AIFs.


AIFs or alternative investment funds are a newly approved class of investors which include private equity (PE), SME, infrastructure, venture capital funds, among others.


However, the contribution of these AIFs would be capped at 10% to meet the promoter share lock-in guidelines.


The proposal has been approved by the SEBI board and would be soon incorporated into the relevant guidelines.


SEBI is of the view that such a step would encourage the professional and first-generation entrepreneurs to tap the capital market to raise funds.


The decision was taken after a recommendation in this regard by SEBI's Primary Market Advisory Committee (PMAC).


The PMAC was of the view that in the companies founded by professionals or first-generation entrepreneurs, where the post-IPO equity held by promoters is less than 20%, AIFs could be permitted to provide the balance equity, subject to a minimum 10% being contributed by the promoters.


The PMAC also suggested that the capital contributed by AIFs for this purpose shall be locked in for two years.


SEBI, however, decided that the requirement of lock-in of three years should uniformly apply to both Promoters and AIFs.


Further, SEBI has decided to review the lock-in tenure at periodic intervals, as per the international practice.


The promoters are allowed to pledge their locked-in shares as collateral security for any loans granted for financing one or more of the objects of the issue, provided pledge of shares is one of the terms of sanction of the loan.


The PMAC had suggested a relaxation in this regard by allowing pledging of locked-in shares for loans taken by the company for other objects of its business, as laid down in its memorandum and articles of association.


SEBI, however, rejected the idea, as it felt that the existing restrictions were aimed at ensuring the commitment of the promoters towards the objects of the issue.


Was it too early to say IMD is off the mark?

Looking at the weather charts and various signs, there would be more rains in next few days. This may also tell the so-called experts that this time the IMD was accurate in its earlier forecast, which it was ‘forced’ to lower

The India Meteorological Department (IMD) had cut its monsoon forecast for September due to likely warming of the Pacific Ocean, popularly known as the El Nino phenomenon. However, looking at the current deficiency of 14% and rainfall of 86%, and few more days left for the seasonal rains, there are chances that this time the monsoon would be normal or near the initial forecast of the IMD.


According to IMD’s latest update to us, there will not be an El Niño effect on the monsoon as chances of its occurrence is receding. Temperature in the Pacific Ocean is okay and in September, the rainfall is expected to be better than the IMD forecast,” agriculture secretary Ashish Bahuguna told PTI.


While the IMD was more in the range in the monsoon forecast, the question remains, why it cut its earlier prediction? There may be one common reason, criticism by the media and ‘experts’. This may have forced the IMD to cut its monsoon forecast to 85% from earlier 94% of the long period average (LPA).


“The Indian media over-reacts and goes practically overboard and overdoes things, not only on the monsoons but practically on each and every issue. Take their hype on the monsoon failures. The consequence was it gave a space for speculators to harden food commodity prices unnecessarily that hurts the poor,” says Rajan Alexander, who runs a blog


The current deficiency is about 13% or rainfall is now nearly 87% of LPA. The chances are from now to September there are going to be very good rains and we can see the deficiency fall dramatically further. “Maybe it is too premature, it is not prudent to take the weather for granted, but in a week or 10 days we will receive better evidence whether the IMD’s initial forecast of a normal ‘monsoon’ is on the on its way of being realized. If so, it would have succeeded in hitting the bulls-eye when all global models have failed. If it wasn’t for media pressure, the IMD would have done India proud,” Mr Alexander said. 


Personal Finance Exclusive
Now, online personal loans from Bajaj Finserv

Bajaj Finserv has introduced online personal loans to its kitty of offers to high networth individuals. While net-savvy customers would like it, they need to be vigilant

Bajaj Finserv, a diversified non-banking finance company (NBFC), has launched online personal loans for high net-worth individuals, with a ticket size between Rs1 lakh and Rs25 lakh, where approval is said to happen in a timeline of five minutes and disbursement within the next 72 hours.


The product is advantageous to target customers. Most of them being corporate employees do not have the time to visit bank branches to apply for loans, or else hold meetings with the sales persons. The expected ease and speed would be an edge for the product. Besides the issue of time, customers would be saved from mis-selling and mis-quoting, a rampant practice in the financial services industry currently.


The factor to be careful about is the interest rates charged online. That needs to be compared with the offline offers since you would not get a chance to negotiate online. The other issue that customers might face would be the cross-selling of other financial products. It may become frequent enough, to the distaste of customers.


Although banks have the online facility of applying for personal loans online, it is mainly designed to generate a lead. The sales person gets in touch with you and you get to do the same documentation like you would have done had you applied offline—by visiting a branch or else fixing up a sales meeting. Applying online only saves you from the initial visit or meeting.


With Bajaj Finserv’s online personal loan, the complete application will be filled online an e-approval will be generated instantly. Once that is done, the disbursement will take place within the next 72 hours of your submitting the documents.




3 years ago

Sir I want personal loan



In Reply to palani 2 years ago

Is">Bajaj Finance personal loans are lowest in interest rates or whats the minmum income required per month.

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