SEBI's June 2025 Reforms: A Big Push Toward Market Transparency & Ease of Doing Business

Introduction In its latest board meeting held in June 2025, the Securities and Exchange Board of India (SEBI) announced a series of reforms aimed at enhancing Ease of Doing Business, improving transparency, and making Indian capital markets more flexible. From changes in IPO rules to enabling co-investment through AIFs and simplifying PSU delisting — this blog explains every major reform with real-world use cases and examples. 1. IPO-Related Changes Under SEBI (ICDR) Regulations What Was the Previous Rule? Promoters were not allowed to include Compulsorily Convertible Securities (CCS) as part of their Minimum Promoter Contribution (MPC). Shares obtained from CCS had a 1-year holding lock-in before they could be sold in IPO. What Has Changed? Now, even non-promoters holding CCS can contribute toward the promoter quota. The 1-year lock-in on CCS shares has been removed. Promoters can now retain ESOPs at the time of DRHP filing. Example: Suppose Flipkart plans an IPO and its early employees or angels have CCS. They can now sell those shares directly in the IPO, reducing dilution worries and giving quicker exits. 2. Mandatory Dematerialisation Before DRHP Earlier: Some shareholders held shares in physical form, delaying IPO processing. Now: All stakeholders like Promoter Group, KMPs, QIBs, Directors must demat their shares before DRHP. Why Important? It helps SEBI: Track frauds Monitor seller identity Ensure smoother settlement 3. Co-Investment Opportunity via AIFs What Was the Problem? AIF managers couldn't offer co-investment flexibility or advisory services on listed securities. What Has Changed? SEBI has introduced CIV (Co-Investment Vehicle) model. Accredited Investors in an AIF can co-invest in specific unlisted companies via CIVs. Conditions: CIV must be a scheme of Category I or II AIF Separate demat, PAN, and bank for each CIV Only for Accredited Investors Filing of Shelf PPM (Private Placement Memorandum) required Example: Blume Ventures investing in a startup like Zepto can now offer select HNIs in its AIF the opportunity to co-invest directly via a CIV, with regulatory backing. 4. ESOP and Promoter Participation in IPO Earlier: Promoters had to liquidate ESOPs before IPO. Now: Promoters can hold ESOPs during IPO filing, easing structuring for startups. Example: Zomato’s founder can now retain his ESOPs when filing DRHP, rather than hurriedly converting or liquidating them. 5. Voluntary Delisting Norms for PSUs What Was the Issue? PSUs with >90% Govt. stake faced delays and complications in delisting. New Provisions: Fixed-price delisting now possible with minimum 15% premium. Delisting becomes smoother with strike-off provision. Unaccepted shares will go to Investor Education and Protection Fund (IEPF) after 1 year. Example: If BHEL is delisted, the Government can offer a fixed price (15% premium) to minority shareholders for buyback. 6. REITs & InvITs: Easier Participation Related parties can’t be considered “public” unless they are QIBs Minimum investment reduced to ₹25L for private InvITs 7. Merchant Bankers & Portfolio Managers: Simplification Clarity on regulated vs. unregulated activities Disclosure documents for PMS providers like Marcellus, Motilal Oswal are now simplified 8. Foreign Portfolio Investors (FPIs): Reduced Compliance FPIs investing under Fully Accessible Route (FAR) for G-Secs now face lower compliance burdens. 9. Settlement Schemes Introduced SEBI brings a one-time settlement for: Brokers involved in NSEL trades Venture Capital Funds (VCFs) facing winding-up violations Summary Table Regulation Key Change Beneficiaries ICDR Relaxed CCS & ESOP norms IPO-bound companies AIF CIV Co-investment model PE/VC Funds, HNIs PSU Delisting Fixed Price Delisting Govt., Retail Investors REIT/InvIT Lower ticket size Infra & Real Estate Investors FPIs FAR relaxation Global Investors Merchant Bankers Clear activity norms MBs in mid-size firms SSE Broadened eligibility NGOs, Trusts, CSR Entities PMS Simplified disclosures Wealth Managers Q&A Section Q: Will these norms reduce IPO preparation time?A: Yes. By relaxing the demat and CCS norms, companies can fast-track IPO readiness. Q: How does CIV benefit AIF investors?A: It enables HNIs to participate in the same deal as the fund, with safeguards like separate accounts and SEBI filing. Q: Why is fixed-price delisting important?A: It removes uncertainty and speeds up the delisting process for PSUs. Final Thoughts SEBI’s June 2025 reforms are a major leap toward making India’s capital markets more inclusive, transparent, and aligned with global best practices. Whether you’re a startup planning an IPO, a fund manager, or a retail investor — these changes open new doors for growth and participation.