Sebi tweaks IPO rules: Eases lock-in norms, simplifies disclosures for investors

The Securities and Exchange Board of India (Sebi) on Wednesday approved a series of amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, aimed at streamlining public issue norms, enhancing ease of doing business, and increasing the engagement and participation of retail investors.

“The Board approved amendments to the ICDR Regulations to streamline certain requirements relating to public issues to enhance ease of doing business and increase the engagement and participation of retail investors,” the regulator said in a release after the conclusion of its 212th board meeting held in Mumbai today.

As part of the changes, Sebi addressed challenges faced by issuers in complying with the six-month lock-in requirement applicable to pre-issue share capital held by non-promoters, particularly in cases where such shares are pledged prior to an initial public offering (IPO).

“In cases where lock-in of the specified securities cannot be created, the depositories shall record such securities as ‘non-transferable’ for the duration of the applicable lock-in period,” Sebi said. The regulator added that depositories will ensure that following the invocation or release of a pledge, the shares in the account of the beneficiary—whether pledger or pledgee—are automatically locked in for the remaining period as mandated under the ICDR Regulations.

According to Sebi, the revised mechanism will ensure compliance with lock-in requirements even when shares are pledged.

Commenting on Sebi’s decision to ease lock-in compliance for pledged pre-IPO shares held by non-promoters, Makarand M. Joshi, Founder Partner, MMJC & Associates, a corporate compliance firm, said the move addresses a long-standing operational hurdle for issuers.

“Most startup founders have traditionally raised funds by pledging their shares. With SEBI approving the revision of lock-in rules for pledged pre-IPO shares, a major operational challenge faced by many companies—especially where shares are pledged to multiple lenders—has now been addressed,” Joshi said.

He said that the regulator has approved a mechanism under which depositories will mark such pledged shares as “non-transferable” in cases where a system-based lock-in cannot be created, ensuring regulatory compliance even after invocation or release of pledges.

Proposes abridged prospectus at DRHP stage

To further improve investor comprehension and accessibility of information, the board approved the introduction of a focused, concise and standardised summary of offer documents in the form of a draft abridged prospectus at the draft red herring prospectus (DRHP) stage itself. This will be in addition to the existing requirement of filing an abridged prospectus at the red herring prospectus (RHP) stage.

“The rationalisation of information in the abridged prospectus and making it available at the DRHP stage is expected to enhance investor comprehension, improve information accessibility and thereby increase the engagement and participation of retail investors in the IPO process,” Sebi said.

The abridged prospectus will be hosted on the websites as prescribed under the regulations, and with its availability, the requirement to prepare a separate offer document summary may be dispensed with in consultation with the Central Government.

Sebi said the proposals relating to public issues were deliberated by the primary markets advisory committee and incorporate feedback received during the public consultation undertaken in November 2025.

Welcoming Sebi’s approval to make a focused, concise and standardised abridged prospectus available at the DRHP stage itself, Joshi said the move would significantly improve information flow to retail investors while reducing documentation complexity for issuers.

“With Sebi approving the availability of a focused, concise and standardised abridged prospectus at the DRHP stage itself, the amendments will mainly help smoothen the way information reaches common retail investors,” Joshi said.

“This is significant when 260 IPOs have raised ₹1.5 trillion and overall equity mobilisation has crossed ₹3.1 trillion, as highlighted by the Sebi chairman in his speech at the 22nd National CA Conference.”

A rationalised abridged prospectus, available early in the IPO process, will make it much easier for investors to quickly understand the fundamentals such as the business, financials and key risks, without having to sift through hundreds of pages or rely on informal sources, he added.

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