Sebi eases ESOP rules for startup founders ahead of IPO plans

In a major relief to startup founders planning public listings, the Securities and Exchange Board of India (Sebi) on Wednesday approved changes to allow them to retain employee stock options (ESOPs) granted at least one year prior to filing a draft red herring prospectus (DRHP).

 

The move addresses a long-standing concern under existing rules, which bar promoters from holding share-based benefits like ESOPs and require them to liquidate such holdings before the IPO — a provision that has particularly impacted founders classified as promoters at the DRHP stage. 

The decision follows the markets regulator's board meeting earlier in the day. 

 

In a press briefing after the meeting, Sebi Chairperson Tuhin Kanta Pandey also said that they have approved amendments to the Sebi (Delisting of Equity Shares) Regulations, 2021 to introduce special provisions enabling voluntary delisting of public sector undertakings (PSUs) through a fixed price mechanism. The new framework will apply in cases where the combined shareholding of the Government of India and other PSUs as promoters equals or exceeds 90 per cent.

 

"Under the new provisions, eligible PSUs can delist through a fixed price process, with the offer price set at a minimum 15 per cent premium over the floor price, which will be determined by registered valuers. Additionally, the requirement for approval by two-thirds of public shareholders has been waived, given the extremely low public float in such cases. Once delisted, these PSUs may continue operating as unlisted entities, be struck off, or be wound up," Pandey said. 

 

"If a delisted PSU opts for voluntary strike-off, it must do so within 30 days after one year from the date of delisting. There are only 5 such PSUs where promoter holding is more than 90 percent," he added