India market regulator pitches country to Silicon Valley investors

Thu Jun 2, 2016 5:48pm EDT
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By Noel Randewich

SAN FRANCISCO (Reuters) - The head of India's financial markets regulator visited Silicon Valley this week to promote rule changes in his country protecting minority shareholders and encourage more investment in his country's thriving technology startups.

U.K. Sinha, chairman of the Securities and Exchange Board of India, said improved regulations make it much easier for investors in the country's over-4,000 technology startups to eventually cash out through initial public offers in Asia's third-largest economy.

"The technology startup scene in India has picked up dramatically," Sinha told Reuters in an interview on Thursday. "A lot of investment has taken place in those companies from Silicon Valley. The question is how they exit, and what is the minority shareholder protection available to them?"

A 2013 overhaul of India's corporate governance rules clamped down on related-party transactions benefiting majority shareholders. It also beefed up the role of independent directors and audit committees on company boards.

Minority shareholders in India now have stronger rights than in the United States, Sinha said.

In Silicon Valley, corporate governance can be a thorny issue. In April, Facebook (FB.O: Quote) said it would create a new class of non-voting shares so that Chief Executive Officer Mark Zuckerberg could give away his wealth without relinquishing control of the social media juggernaut he founded.

Alphabet (GOOGL.O: Quote) has its own widely traded non-voting shares.

In a recent World Bank report, India ranks among the top 13 countries for protecting the rights of minority investors, with the United States lagging in 35th place.   Continued...

Securities and Exchange Board of India (SEBI) Chairman U.K. Sinha speaks during Thomson Reuters Risk Summit in Mumbai, India, May 5, 2016. REUTERS/Shailesh Andrade