To encourage young entrepreneurs to raise capital from the market, which has seen decline is such activity, regulator Sebi is planning to shortly come out with the guidelines for crowd-funding.
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“We are coming out with guidelines on crowd-funding soon, because we want to encourage young entrepreneurs to raise capital. Our aim is to help young people raise capital very smoothly,” Sebi chairman U K Sinha on Thursday said at an investors’ conference organised by industry body IMC here.
Crowd-funding typically involves young entrepreneurs and small groups of people raising funds for their ventures through various online platforms involving individuals as well as organisations.
Of late, such platforms are also being used for launching products that promise certain financial returns to the contributors.
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While it is still in nascent stage in India, compared to large markets like the US, China and the UK, the trend is catching up fast especially in the wake of emergence of social media as a key platform for such activities.
International Organisation of Securities Commission (IOSCO), a body of market regulators across the world including Sebi, recently called for greater regulatory checks on ‘crowd-funding’ investment products to avoid any potential systemic risks in future.
Mr Sinha also said that he is concerned about the decline in capital raising activities as Rs 60,000 crore worth of approvals and intentions to raise money have either been allowed to lapse or withdrawn in the last three years.
“Several companies filed draft red herring prospectus with Sebi to raise capital. But they either withdrew or allowed it to be lapsed, Mr Sinha said.
Mr Sinha complemented BSE for achieving USD 1 billion market capitalisation of companies listed on its SME platform.