Despite boasting a thriving ecosystem of new-age technology companies (NATCs) across diverse sectors such as technology, renewable energy, and artificial intelligence, many face significant challenges in accessing domestic capital markets, which limits their potential to scale and compete globally.
Reflecting on report’s findings, reminds us of Sebi’s 2019 redesigning of institutional trading platform into the innovators growth platform (IGP).
The IGP supports new-age companies across high-growth sectors such as information technology, artificial intelligence, data analytics, biotechnology, or nanotechnology. With relaxed compliance norms, easier access to public capital, and streamlined listing requirements, IGP seeks to create an ecosystem that empowers these new-age companies to scale and compete globally. This aligns with WDR’s advocacy for fostering innovation and reducing barriers to accessing capital.
To support high-growth sector companies seeking capital, the IGP’s eligibility criteria mandated that qualified institutional buyers hold at least 25% of the pre-IPO equity shares. This was aimed to provide credibility to the IGP-listed companies, which are open to investment by individuals with an annual income of ₹50 lakh income per annum or networth of ₹25 crore, as well as body corporates and family trust with networth of ₹25 crore.
This structure is designed to give select investors—who understand the business models of these high-growth companies (with high risk-reward potential)—access to such IGP-listed companies. Additionally, the regulatory framework allows for transition to the main board after one year, provided the company has been on the IGP for at least one year, has 200 shareholders and satisfies other eligibility conditions.
Other easy accessibility factor is that companies can list on the IGP through an IPO (raising minimum of ₹10 crore) or without an IPO. No mandatory profitability track record is required for companies to list on the IGP, even without a matured balance sheet.
India’s IGP successful global counterparts are China’s STAR market and Hongkong’s Tech segment, which when examined reveal that the Indian regulator has taken similar steps, such as relaxing listing norms and allowing companies to list without meeting traditional profitability requirements. Yet, the Indian IGP has not taken off while, platforms like China’s STAR Market and Hong Kong’s Tech market are flourishing as capital raising hub for these innovation companies.
The IGP remains underutilized primarily because NATCs/startups perceive it as “smaller” or “inferior” compared to the mainboard. In contrast, China’s STAR market and Hong Kong’s Tech segment, have been successful in attracting matured companies, thus creating a positive market perception that in turn encourages smaller companies to access these platforms. India, however, has not followed this trend, with most major startups such as Zomato, Paytm, and Nykaa, opting for the mainboard listing instead. Thus, no success stories to drive interest.
Another hindrance is the minimum lot size of ₹2 lakh which discourages retail participation whereas in other STAR and Hongkong Tech markets there is no such restraint on retail investors. Thus, due to limits on specific participation, there is lower trading volumes, and making it less attractive for VCs and PEs.
While IGP has provisioned for superior rights to help founders retain control and function similar to dual-class shares, this does not match up the flexibility offered by STAR and Hong Kong’s Tech Segment.
Venture capital and private equity firms frequently negotiate ‘special rights’ such as liquidity rights, board representation, and veto power, which are missing in Indian IGP. This may be discouraging VCs from opting for IGP as an exit route.
Disclosure requirements also play a role, as startups may be deterred from listing due to concerns over revealing information that could benefit their competitors.
Another key point is Hong Kong’s dynamic regulatory approach. The tech segment frequently updates listing rules to keep the platform competitive and relevant, providing a viable pathway for high-growth potential companies.
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Reforming IGP: Strategies for enhancement
To boost investor confidence and appeal to issuers, domestic institutional participation from mutual funds and insurance companies should be encouraged. Market intermediaries should actively promote the IGP through targeted campaigns and raise awareness among startups and investors.
Furthermore, important insights can be drawn from the World Bank’s report to leverage a resilient IGP strategically. The World Development Report emphasises:
Fostering innovation ecosystems: Creating platforms that allow companies to access capital, scale up, and improve productivity.
Encouraging high-value manufacturing involves investing in renewable energy, artificial intelligence, and advanced manufacturing sectors to promote sustainable growth.
Reducing barriers to capital access: Simplifying regulatory frameworks to draw domestic and international investors.
These recommendations resonate deeply with the need to foster innovation-driven enterprises within India’s economic framework. Lessons from global economies highlight the need to lend strategic significance and growth potential of NATCs by the Indian government to revitalize the IGP which can anchor India’s growth story.
By providing new-age platforms with access to capital for advanced research facilities and technology, we can enhance productivity, create high-value job in emerging sectors, and solidify India’s edge in global competitiveness.
V. Shunmugam is partner at MCQube, Pradiptarathi Panda is assistant professor at IIM Raipur, and Rasmeet Kohli is senior AGM at NISM. Views are personal.
