Online marketers beg Sebi to ease capital-raising norms

Several e-commerce firms, including start-ups, are lobbying the Securities & Exchange Board of India to allow them to tap the capital markets and issue public offers to raise funds.

Under the present Sebi rules, even established e-commerce firms like Flipkart and Snapdeal are not permitted to list on bourses or issue initial public offers (IPOs). This is a little surprising, as these firms seem to have little difficulty in getting funds from venture capitalists.

However, the market regulator is firm that safeguarding investors remains its priority, and norms such as detailed disclosures and strong financial positions are necessary for this.

The firms providing online marketplaces are seeking a relaxation of many of these norms, as most of them are start-ups and operate in a digital landscape, while their valuations are mostly linked to future growth potential.

Representatives from the industry, along with some venture capitalists and private equity funds, recently met SEBI chairman U K Sinha and other top officials to present their case.

SEBI is reportedly ready to provide an 'enabling environment' for prospective listings by companies with good track records, but it is averse to the idea of relaxations that could hamper investors' interests.

The regulator also wants many such companies to use the small and medium enterprises (SME) platform of the stock exchanges to get listed, but most of the firms are eyeing big valuations and have told SEBI that they might have to go to foreign bourses to get listed.

The regulator is also in the process of framing norms for raising funds through crowd-sourcing, and it feels that some small start-ups can tap that route as well.

One of the proposals is allowing easier norms for overseas entities to participate in such public offers, as also for enabling easier post-listing exit routes for the venture capital and private equity firms.

There have been reports that the largest Indian e-commerce firm Flipkart may look at the US market for listing.

Those lobbying for relaxation in the norms include iSpirit, a lobby group for technology companies, which describes itself as "a think tank with a difference".

A clutch of e-commerce firms from India have raised venture capital funding with the sector expected to grow at a scorching pace.

Last year, e-commerce giant Alibaba raised $25 billion in the world's biggest initial public offering about 15 years after the Chinese firm was founded in 1999.

As per its website, iSpirit aims to "convert ideas into policy proposals to take to government stakeholders" and as part of its advocacy efforts they "explain, educate and inform government policy makers and other policy bodies that a vibrant software product industry is vital to India's future".

One of its senior advisors is Mohandas Pai, who was a director at Infosys and has also served as a member of the SEBI board. Besides, he has been on various important panels, including as chairman of SEBI's Primary Markets Advisory Committee (PMAC).