News Line
Sebi to set norms for VCF exit

THE GOVERNING board of Sebi is meeting on December 27 to take up the issues of exit norms for venture funds and amendment of public issue norms for non-technology companies to offer only 10 per cent equity if the size of the float is Rs 250 crore. Sebi has decided to do away with the mandatory exit norm for divesting shares of listed companies within one year for tax benefits. "We are going to delete the current one-year exit norm for VCFs. The funds can hold the shares of listed companies for more than one year," Sebi chairman D R Mehta said during the FICCI seminar on VCFs. This was required in order to attract more funds in the VCF sector and allow them to run profitably, he said. Sebi is considering changes in listing norms to allow non-technology companies to offload only 10 per cent if the size of the issue is a minimum Rs 250 crore, as against the present mandatory norm of 25 per cent divestment. Only technology companies are allowed to divest 10 per cent stake. The move is expected to benefit companies, having a prospective high m-cap, to raise funds from the capital market by divesting a smaller 10 per cent stake rather than offload 25 per cent and witness decline in share values. The rule for compulsory offloading of 25 per cent would be for small companies, Mehta said. So far, about 31 VCFs have registered bringing in Rs 180 crore and another 0.5 billion dollars was expected to flow into india by the end of this fiscal. "VCF inflow is expected to go up substantially," Mehta said referring to 10 more VCFs that are in the process of getting clearances by this fiscal. The Sebi chief, however, ruled out any relaxation of norms allowing VCFs to get listed before three years. "We do not want the public to lose money on VCFs which takes three years to stabilise," he said. Apart from implementing the remaining recommendations of the K B Chandrashekhar committee by December 2000, Sebi would also form an advisory committee to assist the regulator in monitoring the growing sector, Mehta said. Mehta said Sebi was eager to take up with the government the issue of allowing pension and provident funds to flow into the venture capital industry despite strong resistance from some corners. "We can take up with banks and insurance companies to invest a portion of their funds in the sector," he said. Citing the $11.9 billion FII investment so far in the country, he said foreign funds could also be attracted in the VCF industry. In fact, Sebi was considering roadshows in Silicon Valley, Boston and New York as part of showcasing the prospect of VCFs in India. "We are discussing this, may be Nasscom could be involved in the process," he said. Source: The Economic Times Dated : 12th December 2000