In today’s Finshots, we break down reforms from the SEBI’s recent board meeting and what they mean for IPOs, PSUs and everyday investors.

The Story

On June 18, India’s market regulator SEBI held its 210^th board meeting and approved a bunch of changes that, while sounding procedural, could tweak how capital markets function. Some of these amendments were long overdue. Others may seem procedural, but they could quietly change how capital markets function.

Start with PSU delistings. Right now, if the government wants to take a public sector company private (that is, remove it from the stock market), it has to go through a tedious “reverse book building” process. That’s where shareholders get to suggest what price they’d be willing to sell their shares at. The average of those bids then becomes the price at which delisting happens. And it also needs two-thirds public shareholder approval.

Sounds fair but the catch here is that this process often gets hijacked. A few people quote absurdly high prices, and the whole plan derails.

So SEBI’s fix?

If the government already owns 90% of the company, it doesn’t need anyone’s permission. It can delist the company by offering a fixed 15% premium over the regulatory floor price. And the floor price itself will be computed using a combination of acquisition prices and joint valuation reports. That’s it. No bidding, no delays.

Now sure, this might help speed up India’s disinvestment goals. But it also removes a key safety net for retail investors in these companies. With nearly five PSUs currently above the 90% threshold, this move could play out faster than expected, and we’ll have to wait and see how it pans out.

Next up is the startup olive branch for overseas companies and their IPOs.

You see, a lot of Indian startups set up shop abroad and raised funds through complex ownership structures often involving something called as compulsorily convertible shares or CCS. These are shares that start as debt and eventually convert into equity — a structure VCs love because it protects them on the downside while giving upside if things go well. But until now, shares that came from converting CCS weren’t eligible for an Offer for Sale (OFS) in an IPO, which made things tricky for companies trying to shift their base back to India (a process known as reverse-flipping). SEBI has now eased this restriction, allowing such shares to be included in the OFS which gives these companies a cleaner path to come back home and list on Indian bourses.

Another headache with these companies was around Employee Stock Ownership Plans (ESOPs). Earlier, if a founder was classified as a promoter, they had to forfeit their ESOPs before the company filed its Draft Red Herring Prospectus (DRHP). Now, SEBI allows founders to retain and exercise these ESOPs, as long as they were granted at least one year before the DRHP filing. 

It’s a welcome shift, one that clearly reflects India’s ambition to be the listing destination for its own unicorns. But the catch? Most of these rules were to prevent round-tripping (trading in shares without any real purpose just to manipulate stock prices), promoter misclassification and valuation manipulation. So SEBI’s trying to walk a tightrope here by wooing founders without letting the gates open too wide.

There’s also a demat twist. Going forward, every promoter, director and significant shareholder must ensure all their shares are fully dematerialised before filing the DRHP. No more physical share certificates floating around. This might sound boring, but it’s a big move toward transparency and cleaner record-keeping, especially in a market where paperwork delays are legendary.

But SEBI’s focus wasn’t just on startups or the government’s exit strategy. It’s also reworking how institutional capital is raised.

Enter QIPs (Qualified Institutional Placements) which are a fast-track way for listed companies to raise funds from big investors like mutual funds, pension funds, or foreign institutions without going through the full IPO drill. QIPs have become popular in India as companies raised ₹1.3 lakh crore through them in FY25 alone. But they come with a lot of paperwork like full audited financials, thick placement documents and detailed disclosures. So SEBI now says: cut the clutter. Give only the most relevant information. No need for complete audit trails in some cases. The only concern here would be that QIP pricing sends signals to the market. And if that signal is based on partial or unaudited numbers, it might limit the fair price discovery.

SEBI also tweaked how Alternative Investment Funds (AIFs) like venture capital or private equity funds operate. These funds pool money from high-net-worth individuals and institutions and invest in startups or niche businesses. SEBI now allows AIFs to create “Co-investment schemes” which are simply special schemes where some investors can invest directly alongside the main fund in the same companies. And this co-investment now happens under the AIF framework itself, reducing dependency on separate portfolio management services (PMS) licenses. The rule? All investors, whether in the main fund or sidecar, must exit together and on the same terms. This adds flexibility for deep-pocketed investors while preventing situations where co-investors exit early at better terms, leaving others in the lurch. It’s also a sign that SEBI is watching how global PE/VC ecosystems operate and trying to bring that finesse into Indian structures.

SEBI is also rebooting its little-loved experiment: the Social Stock Exchange (SSE).

A few years ago, SEBI launched SSE to help NGOs and social enterprises raise funds in a more transparent and regulated way. But almost no one came. Why? Because the compliance burden was too high. So SEBI’s now making it easier by loosening disclosure rules and widening the eligibility pool.

Then there’s the REITs and InvITs corner (real estate and infrastructure trusts that let you invest in property or infra projects without buying a building or toll road yourself). SEBI has now tweaked how unit holders of these instruments are classified. Earlier, if related parties of the sponsor or manager held units — even as Qualified Institutional Buyers (QIBs) — they weren’t counted as part of the “public” shareholding. That made it harder to meet listing or index inclusion norms. Now, SEBI will allow these QIB-related parties to be treated as public investors, helping expand institutional participation in these trusts.

There were smaller reforms too. Foreign Portfolio Investors (FPIs) who invest in government securities (through channels like the Voluntary Retention Route or Fully Accessible Route) will now face lighter compliance. And Research Analysts and Investment Advisers can now meet deposit requirements using liquid or overnight mutual funds, giving them more flexibility.

Finally, SEBI approved one-time settlement schemes for long-pending legacy cases.

It’s introducing a one-time settlement scheme for brokers caught in the NSEL scam — a ₹5,600 crore default that rattled commodity markets over a decade ago. SEBI wants to close that chapter. A similar scheme is being rolled out for old violations under the now-defunct Venture Capital Fund (VCF) regulations where firms were caught in regulatory grey zones from a different era.

So yeah, SEBI is rebuilding the market’s foundation.

It’s cutting red tape, removing friction, and trying to modernise everything from delistings to disclosures, social investing to startup fundraising. But in doing so, it’s also shifting more responsibility onto the market.

And that’s where the stakes lie. If these reforms work, a maturing economy like India could unlock more efficient capital flows and deepen investor participation across sectors. But the reforms must also ensure the troubles of the past don’t sneak back in through new doors.

Until then...

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