Sequoia Capital India will not face a one-year share lock-in period and can cash out of both Zomato and Mobikwik, thanks to the Securities and Exchange Board of India’s (SEBI's) guidelines for foreign venture capital investors.
While online food delivery platform Zomato launched its initial public offering (IPO) on July 14, digital payment firm Mobikwik is gearing up for an IPO and has released its draft red herring prospectus (RHP) this week.
In the case of Zomato, Mirae-Naver will also be exempted from the lock-in period, as per the Red Herring Prospectus.
"All Equity Shares held by Sequoia Capital India Growth Investment HoldingsI and Mirae Asset-Naver Asia Growth Investment Pte. Ltd as on the date of this Red Herring Prospectus shall be exempt from the aforementioned lock-in requirement since Sequoia Capital India Growth Investment Holdings I and Mirae Asset-Naver Asia Growth Investment Pte. Ltd are FVCIs (foreign venture capital investor)," the Zomato RHP said.
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Mobikwik's DRHP also states that all equity shares held by Sequoia Capital India Investment Holdings III shall be exempt from the lock-in requirements.
Sequoia Capital is already participating in Mobikwik's Rs 400 crore offer for sale and is looking to sell Rs 94 crore. Sequoia Capital India holds a 17.17 percent stake in Mobikwik and about 7.3 percent in Zomato.
Sequoia and Mirae Asset did not respond to queries.
Indian regulations exempt SEBI registered AIFs and FVCIs from the lock-in period of one year, which applies to other pre-IPO investors.
"These regulations were put in to enhance liquidity and allow for larger block sales amongst institutional investors, thus deepening liquidity pools for the listed shares and allowing investors who weren't allotted securities during the IPO to participate in the growth story," said Siddarth Pai, founding partner of 3one4Capital.
However, several people in the startup ecosystem believe that many institutional investors are not looking at exits as companies go public, and want to stay on for the long-term journey. "The value creation is still left. An IPO opens up a whole new paradigm for the sector," a VC, who does not want to be named, said.
Commenting on Zomato’s IPO on July 14, Pine Labs CEO Amrish Rau tweeted, "The difference over the last 2-3 years is that IPO is not considered as an EXIT. It's a milestone on a bigger journey, and founders continue to dream and build big. It's time to stop doubting the Indian startup scene. It has truly arrived and is thriving."
(Edited by : Kanishka Sarkar)