Mumbai | June 19, 2025

In a sweeping move to modernise India’s capital markets and bolster investor confidence, the Securities and Exchange Board of India (SEBI) has introduced a series of regulatory IPO norms and reforms aimed at enhancing transparency, governance, and market access.

Approved at SEBI’s board meeting held on Wednesday, the reforms include a demat mandate for top management in pre-IPO firms, relief for startup founders on ESOPs, a new framework for PSU delistings, and measures to ease foreign investment.

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📌 1. Demat Mandate for Key Pre-IPO Stakeholders

In a significant compliance move towards IPO Norms, SEBI has made it mandatory for directors, key managerial personnel (KMPs), senior management, selling shareholders, and Qualified Institutional Buyers (QIBs) to hold their shares in dematerialised (demat) form before filing IPO documents.

🔍 Why IPO Norms Matter:
Previously, the demat mandate applied only to promoters. This change is expected to:

• Eliminate risks of loss or forgery linked to physical certificates
• Prevent manipulation and delay in transfers
• Tighten pre-listing transparency

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🚀 2. Another IPO Norms– ESOP Reforms to Empower Startup Founders

SEBI has allowed startup founders to retain ESOPs (Employee Stock Ownership Plans) even after gaining promoter status post-IPO. A 1-year cooling-off period between ESOP allocation and IPO filing has also been introduced.

🧠 Impact:

• Encourages more startups to go public
• Rewards founders for long-term commitment
• Minimises misuse of equity-linked benefits

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🏛️ 3. PSU Delisting Made Simpler

In alignment with the government’s strategic disinvestment roadmap, SEBI has introduced a special delisting mechanism for Public Sector Undertakings (PSUs) where government ownership exceeds 90%.

Key changes:

• Lower shareholder approval threshold
• Simplified floor price discovery
• Faster and more predictable exit process

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💼 4. Co-Investment Opportunities for AIFs

Alternative Investment Funds (AIFs) can now offer co-investment opportunities to their investors in unlisted companies, a move designed to:

• Boost capital formation
• Provide tailored investment options
• Deepen India’s private market ecosystem

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🌐 5. Simplified Norms for Foreign Portfolio Investors (FPIs)

To attract long-term global capital, SEBI has streamlined compliance norms for FPIs investing solely in Indian government securities.

Benefits:

• Easier onboarding
• Reduced paperwork
• Higher international participation in India’s debt market

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🔍 What It Means for India Inc.

These reforms signal SEBI’s firm intent to:

• Strengthen market governance ahead of IPOs
• Ease capital-raising for startups and PSUs
• Deepen financial inclusion through co-investment and FPI access

Financial analysts welcome the regulatory clarity, but urge firms to upgrade compliance systems and engage proactively with stakeholders.

“SEBI is striking a balance between investor protection and market facilitation,” said a compliance officer at a leading investment bank.

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