In a recent move, the Securities and Exchange Board of India (SEBI) has announced two major relaxations in the shareholding norms for the IPO-bound startups, which are expected to foster a more conducive environment for Indian startups eyeing pubic listings in the country.

During the regulator’s meeting in Mumbai last week, its board approved a proposal that will now allow startup founders, who also want to identify themselves as company promoters, to retain their employee stock options (ESOPs) if issued at least a year ahead of the IPO.

While giving a nod to this long-pending proposal from the startup ecosystem, SEBI has also relaxed the norms for investors to offload shares in companies that are going public in India after reverse flipping.

The developments have been welcomed with open arms by the key stakeholders, from investors to startups and legal firms, who see it as a positive step to enabling the new-age tech companies that are aiming for public listings.

Abhimanyu Bhattacharya, partner at Khaitan & Co., said, “Some of the new-age issuers in fintech, ecommerce, who were domiciled overseas, were facing certain issues while reverse flipping their holding structures to India. The matter was under discussion for the last six to 12 months. Some of the relaxations will clearly help those issuers which had issued convertible securities to investors in their overseas holding structure.”

It is important to mention that Meesho, PhonePe, Razorpay, InMobi, Flipkart, and Pine Labs are some of the top IPO-bound startups that are either in the process of reverse flipping or have recently changed their domiciles back to India as they prepare for their respective public listings. At a time when more Indian startups are opting to reverse flip, these measures by the market regulator open up the gate for more companies to seamlessly plan their IPOs in the country.

Harshil Mathur, CEO and cofounder of IPO-bound Razorpay, believes that SEBI’s move empowers founders to stay invested by easing the way to change domicile back to the country. “This step fuels a future where the best Indian companies are built, scaled, and celebrated right here. It’s not just a policy tweak, it’s a signal that India is ready to be the world’s innovation hub.”

Why The Change In Norms Matters?

India has become one of the world’s most active IPO markets in recent years, even as listings in some of the top global markets have been sluggish. A favourable regulatory environment and bullish investor sentiment in the equities market also

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