- 6/18/2025
Mumbai (Maharashtra), June 18, 2025, (ANI): SEBI Chairperson Tuhin Kanta Pandey in a press conference held in Mumbai addressed key regulatory gaps affecting investor participation in public issues. He said, "As you know the existing regulation exempt the requirement of minimum holding period of one year, only for the equity shares acquired pursuant to an approved scheme to be eligible for offer for sale in public issue. But if there is an equity share coming out of the convertible securities then this is not available today, so this has resulted in certain investors not being able to participate…"
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00:00SBEB regulations, as you know, the existing regulation exempt the requirement of minimum holding period of one year only for the equity shares acquired pursuant to an approved scheme to be eligible for offer for sale in public issue.
00:19So, but if there is an equity share which is coming out of the convertible securities then this is not available today.
00:31So this has resulted in certain investors not being able to participate in the offer for sale in public issue.
00:37So this is being extended, this benefit is being extended and this will assist the companies which are going for reverse flipping.
00:46Then in terms of in the same way there is minimum promoter contribution and some of the relevant persons are permitted to contribute their equity shares.
00:59And what are these relevant persons like alternate investment funds, foreign venture capital, scheduled commercial banks, public financial institutions, insurance companies.
01:12These are, these can actually contribute to the deficit in the MPC.
01:19But promoters are allowed to contribute equity shares arising from conversion of fully paid up shares for MPC.
01:29This is, this is, this is provision is absent for the relevant person.
01:34So what happens is that if the scheme of arrangement, you know, these relevant persons have said AIFs, foreign venture capital funds, commercial banks, etc.
01:44They get their CCS, they get equity shares from conversion of CCS, then it is not counting.
01:55So this will, again, this will facilitate the arrangements.
02:00Then the third important point in this is the ESOPs.
02:07Now, under the existing regulations, promoters are ineligible to hold or be granted share-based benefit, including ESOPs.
02:16If they hold such share-based benefits, the time of filing of DRHP, they have been required to liquidate such benefits prior to the IPO.
02:26Now, this provision has been found to be impacting founders classified as promoters at the time of filing of DRHP.
02:33So the proposal approved by the board shall facilitate founders who receive such benefits at least one year prior to filing of DRHP,
02:43with the board to continue holding or exercising such benefits even after being specified as the promoter and the company becoming a listed entity.
02:54These proposals will also, you know, promote many of the start-ups, etc., when they come for listing and the founders losing those.
03:06They have to, today, they have to liquidate.
03:08So if they have been given the ESOPs one year prior to listing and filing of the draft DRHP, then they can continue to hold them.
03:18However, the board has not approved, I mean, there was, during consultation, some people were saying that even the ESOPs should continue to be made available to them even after their listing, post-listing as ESOPs.
03:36Those have not been agreed to yet.
03:43So this is the first set of proposals.
03:47The second set of proposals relates to promoting dematerialization of existing securities.
03:58You know, we want to, as you know, that securities need to be demattered.
04:03However, due to various reasons, some of the physical shares are still there.
04:08They may be due to different reasons.
04:10They may be because the people have deceased and the claimants are not there.
04:17It could be an inheritance issue.
04:19It could also be some love of physical certificates by some.
04:23However, at the time of, so a lot of efforts SEBI has taken due to which this problem has been really reduced.
04:33But going forward, we are also saying that when they come up to IPO, then earlier the provision was that at least all the holding of promoters had to be dematerialized.
04:46Now we are expanding that list.
04:49The following category of shareholders, they would have to be, we are mandating dematerialization of shares held by following categories of shareholders.
05:00Promoter group, selling shareholders, key managerial personnel, senior management, qualified institutional buyers, directors, employees, shareholders with special rights,
05:13all entities regulated by financial sector regulators, and any other category of shareholders as may be specified from board from time to time.
05:22So we are expanding the list of the categories who are holding the physical shares to be mandatorily dematerialized at the time of IPO.
05:40The third proposal is regarding simplification and streamlining of placement document for qualified institutions placement.
05:53So as you know, the QIPs are undertaken by listed companies and they are offered to qualified institutions buyers.
06:02And these institutions are well aware of the developments, they are institutional players.
06:12And listing organizations, listed organizations, there is a lot of disclosures already available.
06:20So therefore, this placement document was earlier too long and that has now, that's supposed to be rationalized.
06:30And this is building on the simplification and streamlining earlier undertaken for rights issued by listed entities.
06:37So what we are basically, the risk factors, now we are saying that they can be included only specified in relation to the issue.
06:47Not all of the risk factors need to be given.
06:50Providing summary of financial position, providing a summary of issuer's business instead of giving detailed this thing.
06:58I think there are several such things where we have rationalized as a result of which is expected that the placement document may be reduced approximately by 40 to 50%.
07:15And it will also bring in uniformity in disclosures by all the issuers.
07:22Here I just want to point out as a generic case, all of these proposals, there have been consultation papers, public consultations have been done.
07:33It has gone to the respective committee and then it has come to the board.
07:37So I am not repeating it for every item, but the same process has been followed and you are aware that we have now a regulation,
07:47which says how to bring in changes in the regulation, which mandates public consultations.
07:53So all of these cases are public consultations have been held.
07:57And that is how I think media already knows most of the time.
08:01But this time you will also see in your press releases a little bit of a different version, maybe.
08:09And you maybe you can really very quickly grasp, you know, what is being changed because all of these are very technical matters.
08:18So, of course, if you need further details, you may, of course, refer to consultation papers which give you more information.
08:27The fourth proposal relates to the special measures to facilitate voluntary delisting of certain public sector undertakings.
08:37Now, there are some public sector undertakings where the holding is 90% or above that of promoter.
08:48Now, they are there due to many legacy reasons, historical reasons, also due to a fact that some of them may not be doing well,
08:57but they may have been listed in the past on a very thin, you know, sort of float.
09:04And these may be required to be delisted in one sense.
09:15And we have now we are allowing a special measures for such PSUs.
09:22But these PSUs expressly do not include banks, non-bank financial companies and insurance companies.
09:31So there was there have been some media reports on whether it will impact public sector banks or whether it will impact LIC or other insurance companies.
09:42So this is not applicable for such categories, which is expressly mentioned.
09:48It's only mentioned for the other PSUs, which are 90% and above.
09:53And there basically what is being provided is easier method where the delisting would be possible through a fixed price delisting process,
10:13which will be at least 15% premium over the floor price.
10:17And the floor price will be determined through the valuers and all that, that is explained.
10:24And also the requirement of threshold of approval by public shareholders in favour of delisting set at two-thirds majority is also dispensed with,
10:33because number of minority shareholders is very, very low.
10:42Now, these eligible PSUs, which are delisted, now they may continue as an unlisted entity or they may be struck off or it may be decided to be wound up.
10:58In that case, if there is a, those delisted PSUs undertake voluntary strike-off effected after the date of listing,
11:10but not later than 30 days from the expiry of one year period subsequent to delisting.
11:15So, subsequent to delisting one year plus 30 days within which any remaining people who have not been able to claim their, you know, get their shares in cashed,
11:29they would be able to come and take it.
11:34And thereafter, this will go to the designated stock exchange and this will be available for seven years.
11:43And post which, if the remaining amount, if any, shall be transferred to Investor Education and Protection Fund for entities established under Companies Act
11:52or to SEBI's Investor Protection Fund.
11:56For any claims to be made subsequent to such transfer, the investor can approach the designated stock exchange,
12:01which will be reimbursed by IEPF or IPF as applicable.
12:07So, again, these proposals have also gone through a public consultation process.
12:13Just for your information, there are only five such listed PSUs where promoter shareholding equals or exceeds 90%.
12:34The next proposal relates to rationalisation of regulatory framework for social stock exchange for ease of doing business.
12:43Now, in order to facilitate social enterprises, including for-profit organisation and non-for-profit organisation,
12:52accessing the social stock exchange mechanism, so a number of amendments have been approved.
13:01Key amendments are inclusion of legal structures such as trust registered under Indian Registration Act 1908,
13:10charitable society registered under the Society Registration Act of the relevant state and companies registered under section 25 of the erstwhile Companies Act.
13:21These have been brought in within the definition of NPOs in the scheme.
13:26Then, there is a new term, social impact assessment organisation, which will replace the term, social impact assessment firm.
13:38This will be signalling a profession agnostic approach for such organisation and requiring such organisation to be empanelled with specified SROs, self-regulatory organisations.
13:53Such organisation will be required to have at least two social impact assessors in full-time employment for conducting social impact assessment.
14:02This also includes requiring social enterprises to raise funds through social stock exchange mechanism within a period of two years from its registration on such exchange,
14:15failing which its registration will lapse, expansion of eligible activities for social enterprises to mobilise funds,
14:25by aligning activities with activities listed in schedule Roman 7 of the Companies Act, which governs the CSR activities of companies.
14:41So, that has been aligned to that.
14:45Then, SEBI can specify more target segments for inclusion under the eligibility criteria.
14:50Easing eligibility criteria for NPOs.
14:54Bifurcation of the annual disclosure requirements into financial and non-financial matters.
15:00And NPOs being permitted to self-report the annual impact report of the projects, even when funds have not been raised through social stock exchange.
15:10So, all of these measures will help.
15:15Further, give a further fillip to the social stock exchange system.
15:22It's a very unique and novel system.
15:25So far, 20 NPOs have, non-profit organisations have raised about 20 crore.
15:32But there is a greater, there is a much, much greater potential.
15:38And with an expanded and rationalised framework, it is expected that more enterprises, more people will be able to raise funds through this mechanism.
15:49The next item relates to the rationalisation of merchant bankers' regulations for ease of doing business.
16:04As you are aware, in December 2024 meeting, board meeting, a slew of proposals were approved in terms of bringing in contextualised,
16:19because these regulations are 1992 vintage and they were updated and a number of things were brought in.
16:29One of the issues where we needed to review was regarding to the decision to hive off into a separate legal entity,
16:40which has been reviewed and now it has been decided that the legal hiving off is not necessary.
16:54Merchant bankers may undertake activities which are within the purview of any other financial sector regulator,
17:01provided it shall comply with the regulatory framework, if any, as may be specified by the respective financial sector regulator.
17:21Third, they can also undertake activities which are not within the purview of SEBI or any other FSR,
17:30provided they are fee-based, non-fund based activities and pertain to the financial services sector.
17:36And these activities shall be subject to the conditions that shall be specified by SEBI.
17:43Basically, allowing them to take up those activities but with proper segregation of that into a business unit and also informing the clients very clearly that these are unregulated activities.
17:59So there is a proper disclosure and also subject to handling the conflict of interest properly.
18:06So therefore, the rest of the proposals are as it is, as per December 24 approvals.
18:15And this proposal of hiving off is now changed and there is no hiving off of legal entity is necessary.
18:30The similar thing is regarding the debenture trustees.
18:37A number of measures were taken for ease of doing business in December 2024.
18:45However, one of the points was again hiving off of an activities, hiving off the activities which are unregulated to another legal entity,
19:00which has now been reviewed and it has been decided that that will also not be necessary with similar conditions.
19:08The conditions are the same as the merchant bankers.
19:15And rest of the proposals of December 2024 will be as it is.
19:24The next proposal relates to the ease of doing business for the activities of real estate investment trusts
19:30and investment infrastructure trusts which are in which.
19:35Now, there is the first point in that is the clarification which is needed in terms of definition.
19:45So, the clarification on definition of public for minimum public unit holding requirement has been done.
19:54There has been some confusion around it.
19:56The second issue has been that ease of doing business is the adjustment of negative cash flows at holdco
20:06with distributions received from SPB in calculation of the net distributable cash flows.
20:14So, it is like there is sometimes in a structure there is a holdco, there is a holding company and there is an SPB below that.
20:24Now, our regulation says SPB, whatever cash flows come in, 100% will be distributed.
20:30And holding company, whatever is there, 90% will be distributed.
20:35Now, there may be a problem that the holding company may have some negative cash return for a while
20:43because they can also hold the assets and they can also take the debt.
20:47In which case, there will be, this is a grey area in which, you know, then they will not be able to set it off.
20:55So, whatever the cash flows are coming from SPB and whatever is that, so net distributed will be then distributed.
21:05So, there will be a possibility of adjustment of those negative cash flows and this will be done as per the proper disclosure.
21:15So, next is set of thing is alignment of timelines for submission of quarterly reports under INVIT regulations within the timelines for submission of quarterly financial results.
21:27Similarly, alignment of timelines for submission of quarterly reports to trustee and so on and so forth.
21:35So, all of these, including valuation report.
21:39So, all of these have been now brought in line with the submission of financial results so that there is no extra burden, compliance burden.
21:47So, another one is alignment of minimum allotment with trading lot for privately placed INVITs.
21:56So, this trading lot, as you know, is for secondary market lot is 25 lakh for INVIT and for primary market lot it was 1 crore or Rs. 25 crore depending upon the asset mix of the INVIT.
22:15So, they have been aligned.
22:24The next set of proposals is SEBI certification of associate persons in the securities market.
22:31And you know that there are, for various intermediaries, there is a requirement to give to their employees, etc., which we call associated persons, certificates.
22:48They have to obtain certificates, they have to obtain certificates from NISM and other things.
22:52And this is today, you know, it has to be gazetted.
22:55You know, you have to make an official gazette.
22:58So, that is a cumbersome process.
23:00We have said that this can be notified with an order instead of a gazette.
23:07That means who qualified to get the certificate and what are the timelines, etc.
23:14Then we have another important thing regarding custodians.
23:21As you know, the custodian regulations of 1996 have been updated.
23:28After a long time, after 1996 have been updated, this board, this was cleared by the board in December 2024.
23:40But there, there was an issue regarding, again, hiving of that unregulated activities into a separate legal entity, which has now been dispensed with.
23:54And custodians shall not be required to set up a separate legal entity subject to certain conditions and that will be notified.
24:15The next set of proposals is regarding co-investment opportunities within the AIF structure for Category 1 and 2 AIFs to enhance ease of doing business for AIFs.
24:32This has been also an important demand of the industry for a long time to permit the Category 1 and 2 AIFs to offer co-investment scheme.
24:42This is, to some extent, this is already possible under the portfolio manager scheme under PMS regulation.
24:55However, more flexibility has been given now.
24:59In addition to that, whatever is already available under PMS, a co-investment will be possible.
25:06And co-investment means investment made by a manager or a sponsor of the AIF or by investor of Category 1 and 2 AIFs in unlisted investing companies where such a Category 1 or Category 2 AIFs makes investment.
25:23So, co-investment schemes introduced under AIF regulations will have the following key features.
25:36This shall mean a scheme of Category 1 or Category 1 or 2 Category AIFs which facilitates co-investment to accredited investors of a particular scheme of an AIF in unlisted securities of an investing company where the scheme of AIF is making investment or has invested.
25:55A separate Category 1 a separate Category 1 a separate Category 1 a separate Category 1 a separate CIV scheme should be launched for each co-investment in an investing company subject to safeguards to ensure that the scheme is used only for bona fide purposes.
26:07Certain regulatory requirements applicable to other AIF schemes shall be relaxed for CIV schemes.
26:14So, this scheme will allow a lot of flexibility and, you know, make it available for investors and other additional opportunities without actually giving, without adversely affecting the interest of those who have invested, you know, in the main scheme, in main AIF.
26:44And those safeguards have also been given.
26:47For example, exit has to be uniform together.
26:51It can't be, exit can't be earlier than or later than the main exit.
26:57And similarly offering the co-investment opportunities to everyone.
27:03The next proposal is regarding the reviewing the regulatory framework for angel funds under AIF regulations to rationalize their fundraising and enhance ease of doing business.
27:20Now, one of the core principles of SEBI is to ensure sustainable capital formation across securities market and facilitate investments into start-ups.
27:32However, we also have to ensure that these investors with risk capabilities are shown offers to invest in unlisted start-up through angel funds.
27:42So, there is no, currently there is no verification other than by fund manager as to whether an investor qualifies as an angel investor or not.
27:51In addition, angel investor criteria was defined in 2013 and economic thresholds need to be updated to reflect the change market indicators since then.
28:01So, therefore, given the above background, angel investors will now need to be accredited investors, which is in short AI.
28:13Note that in AI there is independent verification of investor status with thresholds that update to the current market levels.
28:21Now, the board has also approved a proposal to amend ICDR so that AIs will be included as QIBs for the limited purpose of investment into angel funds only.
28:35Not for IPOs or other things, only for angel funds.
28:40AI adoption has been minimal now.
28:42In this context, the accreditation process has already been eased and we have issued a consultation paper on this issue yesterday to separately look into how we can popularize and ease the AI, that means accredited investor ecosystem, ecosystem where they can actually make it faster.
29:07So, the basic intent is that once you have the accredited investor ecosystem which is up and running, I mean larger, today we have not many are accredited, it will be possible for us to consider more lighter touch regulations because these investors would be in any case,
29:36they will be able to be able to bear the risks with full due diligence of their own and therefore would not require the kind of investor protection which you will normally afford to a retail participant.
29:53So, there are several ease of doing business measures for angel funds also.
29:58For example, relaxation of floor and cap for investment in an investing company which was earlier 25 lakh and 10 crore respectively has been expanded.
30:10Now it is 10 lakhs, that means floor is now 10 lakhs and ceiling is now 25 crore.
30:17So, and removal of concentration limit of 25% of total investment in an investing company has also been removed.
30:27Allowing contributions from more than 200 AI investors in investments will be possible through the QIB definition.
30:39Enabling follow-on investments in an investing company which is no longer a start-up, that will also be possible.
30:46For fairness, angel funds shall offer each investment opportunity to all its investors and allocate investment among consenting investors in the manner as explicitly stated in the PPM.
30:59And there is also a skin in the game issue there as well.
31:09The next proposal is to relax regulatory compliances for FPIs investing only in government securities, GSECs, to facilitate ease of doing business.
31:21Now, certain regulatory requirements for all existing and prospective FPIs that exclusively invest in GSECs, and we will refer to them as GS-FPI, will actually face less regulatory requirements.
31:44As you know, several global index providers have announced inclusion in GSECs in their respective bond indices.
31:53And FPI investment in FAR eligible securities has seen a significant increase and has crossed 3 lakh crore mark in March 2025.
32:05So, certain regulatory requirements specified for FPIs under the FPI regulations and circulars issued there are applicable to FPI investment into equity in corporate bonds and not relevant for investment in GSECs.
32:18In this context, the below-mentioned relaxations are expected to give a fillip to FPI's investment in government securities.
32:28And what are these relaxations?
32:29The important ones are, the periodicity of mandatory KYC review for GSPI shall be harmonized with RBI's requirement.
32:38GS-FPIs will therefore have less frequent mandatory KYC reviews.
32:43Existing and prospective FPIs that exclusively invest in GSECs under the fully accessible route shall not be required to furnish investor group details.
32:53Such details are largely relevant for monitoring FPI exposures into equity and corporate debt only.
33:00Non-resident Indians, overseas citizens of India and resident Indian individuals shall be permitted to be constituents of GS-FPIs without any restriction applicable to other FPIs, including being in control of GS-FPIs.
33:16The conditions regarding participation of RIs, for example contribution to the liberalised remittance scheme and in global funds whose Indian exposure is less than 50% shall continue to apply.
33:31GS-FPIs shall be permitted to intimate all material changes within 30 days instead of 7 days otherwise.
33:39The Board has also approved an amendment to delete Schedule 5 from regulations containing the format of a model disclosure document along with restructuring of disclosure, issuing the same in a simplified manner through a circular.
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