Start-up Exchange: Unlocking Value for Start-up Leading to Overall Growth by Listing on the BSE Start-up Exchange

‘Start-up Ecosystem in India is one of the most vibrant ecosystems in the world leading to overall Economic Development.’

?‘The Indian Start-up ecosystem is one of the most vibrant ecosystems in the world. A platform for these new-age businesses to list and trade creates overall economic value for all stakeholders, leading to a large amount of employment opportunities and overall growth in the economy.’

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Over the past two decades, the Indian economy has transformed to a very large extent and India has been labeled as the next start-up nation of the world with the highest number of Unicorn Companies outside the US and China. During the 1980s 80% of the millionaires in India were as a result of ancestral wealth that was present for generations. Today 80% and more of the millionaires in India are either first-generation or wealth created as a result of business and economic activity in the past decade or so. This clearly shows that the entrepreneurship spirit is well alive and kicking in India and Indian entrepreneurs not only want to make a mark in the Indian context but also have contributed significantly on the global platform. The start-up companies in India have attracted talent and capital from Indian investors as well as global giants. This surge in start-up activity in India has created large number of jobs and helped to boost overall economic activity.

?With billions of dollars being invested in start-up in India, a large number of informed investors always wanted an avenue where they could invest in these companies, just as pure relatively small investors rather than as professional investors like Venture Capital funds. This is only possible if there is a platform on which these companies can get listed.

?BSE (Bombay Stock Exchange) has set-up the platform for start-ups as per the norms placed by SEBI (Securities Exchange Board of India). This platform offers an entrepreneur and investor friendly atmosphere which permits the listing to all start-ups dispersed throughout India, from unorganized sector to a structured sector. The start-up listing platform has been launched by the BSE in December 2018 with the aim to allow deserving start-ups to raise capital from the market.

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The start-up companies who want to get listed on BSE, start-up platform must have their businesses in the one of the following sectors. They must belong to IT and nanotechnology sector, bio-technology and space technology, and others are 3D printing, life sciences, e-commerce, artificial intelligence etc. The platform has been designed especially for new gen companies, where the companies will enjoy immense growth and scale-up to a very large extent. This will result in value creation of all the investors which include professional investors as well as venture capital funds that look at an avenue to create liquidity and explore a possible exit option for their investment. ?With the possibility of listing of the start-up exchange, it has given a huge boost for early stage start-up companies and a resounding confidence to investors who have invested in these companies as well as potential investors that are looking at investing in these early stage companies.

?Requirements for listing on the BSE Start-up Exchange

?·????????The start-up needs to be a company, either incorporated under the Companies Act, 1956 / 2013.

?·????????The start-up should be in one of these sectors, namely IT, IT Enabled Services, Bio-technology and Life Science, 3D Printing, Space Technology, E-Commerce, Hi-Tech Defence, Drones, Nanotechnologies, Artificial Intelligence, Big Data, Enhanced/Virtual Reality, E-gaming, Exoskeleton, Robotics, Holographic Technology, Genetic Engineering, Variable Computers, Inside body computer technology and other Hi-tech based companies.

?·????????The company should be registered as start-up with MSME/DIPP (Department of Industrial Policy and Promotion). In case the company is not registered as start-up with MSME/DIPP then the company’s paid-up capital should be minimum INR 1 crore.

?·????????The post issue paid-up capital of the company (face value) shall not be more than INR 25 crores.

?·????????There should be preferably investment by QIB investors (as defined under SEBI ICDR Regulations, 2009) / Angel Investors/ Accredited Investors for a minimum period of 2 years at the time of filing of draft prospectus with BSE.

?·????????The company should have a positive net worth. The company should be in existence for a minimum period of 2 years on the date of filing the draft prospectus with BSE.

?·????????The company must have a website.

?·????????It is mandatory for the company to facilitate trading in Demat securities and enter into an agreement with both the depositories.

?·????????There should not be any change in the promoters of the company in preceding one year from date of filing the application to BSE for listing under start-up segment.

?Process to be followed to get listed on BSE Start-up Exchange

?·????????Submission of DRHP (Draft Red Herring Prospectus) which is made by the Merchant Banker. The Merchant Bank will conduct a Due Diligence of the company and draft the DRHP using the help of a legal counsel that will conduct a Legal Due Diligence.?

?·????????Verification and Site Visit: BSE verifies the documents and processes the same. A visit to the company's site shall be undertaken by the Exchange official and an interview / detail discussion is carried out with the promoter that is looking at listing his / her company on the stock exchange.

?·????????Approval: BSE issues an In-Principle approval provided all requirements are complied. The Merchant Banker files the RHP (Red Herring Prospectus) with the Stock Exchange, post which it is filed with the ROC. Once approval is received from the ROC, the Merchant Banker intimates the Exchange regarding the opening dates of the issue along with the required documents.

?·????????Then the IPO opens and closes as per schedule.

?·????????Post the IPO closing, basis of allotment of shares is determined and appropriate shares are allocated to the respective investors.

?The Indian economy has passed through very turbulent times in the last two years, with the pandemic leading to an economic devastation on the whole.?With the worst behind us, India is well poised to grow in double digits for the next many years leading to immense wealth creation for all. Even in these challenging times, the start-up companies have been a lot of support to the economy in terms of overall growth as well as providing employment to lakhs of people. With 20+ unicorns in India in the last 12 months, the start-up ecosystem has become one of the most vibrant ecosystems in the world. With the BSE Start-up platform for start-ups to list on the stock exchange, it has provided the much needed boost to the start-up companies and liquidity for trading of the shares of these companies which in turn attracts a very large audience in terms of investors with relatively smaller investment ticket size of the amount invested.

?There will be more wealth creation in India in the next 10 years than in the last 75 years and start-ups with innovative and scalable ideas will have a huge positive booster on the Indian economy. Investors should keep an eye on good quality companies that are getting listed on the BSE start-up platform, as the micro-cap company today can be a leader in their respective domains tomorrow and investing in these companies will lead to wealth creation to a very large extent especially with the ability for these companies to migrate to the main board of the stock exchange will result in expansion of valuation and market cap on the whole.

?_Farzan Ghadially