SEBI Unlocks the IPO Door for India’s Next-Gen Startups

India’s startup ecosystem just got a major boost, with SEBI rolling out a series of reforms aimed at making it easier and more attractive for new-age tech companies to go public. These changes are designed to address long-standing hurdles around founder incentives, capital access, and regulatory complexity—giving both founders and investors more confidence in the IPO process.

 

Founders Can Now Retain ESOPs Post-IPO:

SEBI will allow startup founders to keep Employee Stock Option Plans (ESOPs) granted at least a year before filing for an IPO. Previously, founders classified as promoters had to forfeit their ESOPs, making it harder for them to stay motivated and aligned with shareholders after listing. This change is expected to encourage founders to stay committed through and beyond the IPO process, making public listings more attractive and boosting investor confidence.

 

Reverse Flipping Made Easier:

Startups that shift their legal base back to India (reverse flipping) will find it simpler to include shares from converted securities in their Offer for Sale (OFS). This move supports the growing trend of Indian startups returning to domestic markets for better IPO opportunities and higher valuations, while also simplifying equity structures and fundraising.

 

Angel Investment Rules Get Flexible:

Accredited angel investors now have a wider investment window (₹10 lakh to ₹25 crore), opening up early-stage funding to a broader pool of serious investors. This is expected to fuel more diverse and robust early-stage capital for startups, especially in Tier 2 and Tier 3 cities.

 

Simplified Compliance and Disclosures:

SEBI has reduced the regulatory burden for startups by streamlining documentation, clarifying ESOP rules, and allowing more key investors to contribute to minimum promoter shareholding. The regulator is also tightening disclosure norms for IPO-bound tech companies, especially around key performance indicators and related party transactions, to ensure transparency and protect investors.

 

Impact on the Ecosystem:

These reforms are expected to unlock new growth and exit opportunities for founders, attract more domestic and global capital, and make India’s public markets more accessible for innovative tech companies. Startups like Razorpay, Meesho, Groww, and Pine Labs are among those likely to benefit, with nearly $10 billion in IPO fundraising plans in the pipeline for this financial year.

 

SEBI’s new rules mark a shift in mindset, treating startups as long-term value creators and making India a more founder- and investor-friendly destination for tech IPOs.

 

Source: TICE News, Entrackr, Inc42, TechResearchOnline, Financial Express, Economic Times, The Hindu BusinessLine