 "Difficulties of an internet entrepreneur")
Recently, I met an internet entrepreneur who was keen on getting his business listed. There are at least three different pulpits for companies to tap with the launch of the institutional trading platform, also known as ‘start-up platform’.
However, none of these fits his requirement. The new start-up platform has been announced but it is not clear when it will be operational. Even if it becomes live today, our friend has other problems.
The Securities and Exchange Board of India (Sebi) rules state that internet companies or companies in the information technology sector need to have qualified institutional buyers (QIBs) holding at least 25 per cent. “I have got money from two investors. But, I have not diluted so much and one is not a QIB. I’m not going to do a fresh round only to comply with the start-up platform rules. Especially when I don’t know when it is going to start,” he said.
The problem with the former is the money laundering scam unearthed by Sebi, where some promoters allegedly used their stocks to launder money.
“It is a big put-off. Though, typically, such small companies’ platforms have been prone to manipulation and been a haven of those who don’t want to go to the main board for compliance reasons,” he says. Also, the amount he can raise on the SME platform is too small, as his company’s annual revenue has already touched a few hundred crore.
Then, the option left is the main board. “We are okay with all the disclosure requirements. We do not want any relaxation there. This seems our best option in terms of the size of the market and quality of investors. But, there are other problems,” he said.
What? The Sebi rules here have still not kept up with the realities of internet businesses. These invest heavily in technology, people and customer acquisition. There should be ways to recognise the outcomes of such investments as assets, the entrepreneur feels.
For example, this man’s business owns 300,000 unique telephone numbers. “My monthly bills run into lakhs. This is a key element of my business. And, it is my asset. Its worth is in crores. But, this is not recognised as a ‘tangible asset’,” he regrets.
Databases of customers are another major area of asset creation for these businesses. “The databases contain millions of customer and client names. These are assets, which I have spent years in building. But, for Sebi, these are worth nothing.”
It is not only a Sebi issue. Even the accounting standards do not fully recognise these new-age assets and liabilities.
However, our entrepreneur, who has seen a few cycles of booms and busts, does not want to go abroad for valuations. He is confident his company can list on the Indian bourses one day.
It is too early to say if Sebi has taken the right step in creating a new platform and prescribing conditions that seem tailor-made to suit a specific ownership structure and a specific sector. However, it should not stop exploring ways to make the main board more inclusive and more useful for capital raising by new-age internet companies.
However, none of these fits his requirement. The new start-up platform has been announced but it is not clear when it will be operational. Even if it becomes live today, our friend has other problems.
The Securities and Exchange Board of India (Sebi) rules state that internet companies or companies in the information technology sector need to have qualified institutional buyers (QIBs) holding at least 25 per cent. “I have got money from two investors. But, I have not diluted so much and one is not a QIB. I’m not going to do a fresh round only to comply with the start-up platform rules. Especially when I don’t know when it is going to start,” he said.
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That leaves the two other places to tap, the SME (small and medium enterprises) platform and the main board.
The problem with the former is the money laundering scam unearthed by Sebi, where some promoters allegedly used their stocks to launder money.
“It is a big put-off. Though, typically, such small companies’ platforms have been prone to manipulation and been a haven of those who don’t want to go to the main board for compliance reasons,” he says. Also, the amount he can raise on the SME platform is too small, as his company’s annual revenue has already touched a few hundred crore.
Then, the option left is the main board. “We are okay with all the disclosure requirements. We do not want any relaxation there. This seems our best option in terms of the size of the market and quality of investors. But, there are other problems,” he said.
What? The Sebi rules here have still not kept up with the realities of internet businesses. These invest heavily in technology, people and customer acquisition. There should be ways to recognise the outcomes of such investments as assets, the entrepreneur feels.
For example, this man’s business owns 300,000 unique telephone numbers. “My monthly bills run into lakhs. This is a key element of my business. And, it is my asset. Its worth is in crores. But, this is not recognised as a ‘tangible asset’,” he regrets.
Databases of customers are another major area of asset creation for these businesses. “The databases contain millions of customer and client names. These are assets, which I have spent years in building. But, for Sebi, these are worth nothing.”
It is not only a Sebi issue. Even the accounting standards do not fully recognise these new-age assets and liabilities.
However, our entrepreneur, who has seen a few cycles of booms and busts, does not want to go abroad for valuations. He is confident his company can list on the Indian bourses one day.
It is too early to say if Sebi has taken the right step in creating a new platform and prescribing conditions that seem tailor-made to suit a specific ownership structure and a specific sector. However, it should not stop exploring ways to make the main board more inclusive and more useful for capital raising by new-age internet companies.