Darwin says, ‘survivor of fittest’ and history tells us that civilisations and cultures sustain much longer than an individual or kingdom or religious supremacy. Survival is biology. Sustainability is strategy. Similarly, when we see if we see organisations / institutions, longevity and success in business is not luck; it is disciplined alignment with purpose. And Indian corporate laws provide that design which can facilitate and even push for strategy which will lead to sustainable success.

In last 2 decades number of companies which have successfully got listed have been increasing consistently viz. from 48 in 2007 to 372 in year 2026. Overall market capitalization of Indian corporates have increased from ~1,01,49,290 Crore in FY 14-15 to ~4,13,75,586 Crore in FY 24-25, so wealth creation engine via companies going for listing is amazing contributor for India Growth story. India’s growth story is not written in GDP numbers alone; it is written in listed companies. Our Prime Minister has kept goal of Vikasit Bharat by 2047 i.e. GDP of USD 30–35 trillion, this will need market cap of listed companies to minimum ~₹3,400 Lakh Crore which is 8-9 times more than today. There is no doubt in mind of anyone that if India has to grow, entrepreneurship and number of successful companies is the major lever for achieving this.

But growth is never a straight line; it is a battle between upward forces and downward pulls. Success depends on one equation: strengthen what lifts you, weaken what pulls you down.

Number of companies which were dragged in insolvency has also been significant 8833[1] and almost 8-10% top 500 companies went through IBC in last 10 years. Companies don’t fail in one moment, they drift away from discipline and markets don’t reward the biggest companies, they reward the most consistent ones.

My belief and experience is if regulations are followed in spirit, it gives strength and will lift the company up. From this context, successful IPO is not just capital raising, but character revealing. Listing is not an event; it is a transformation.And preparing for IPO and adopting regulations in right manner plays a very strategic role for corporates to assure sustainable success for corporate and every stakeholder. This is need of nation. In this article we are sharing some elements which contribute to sustainable success.

1. Investor engagement/ making yourself attractive for investors

Stock market works on future pricing. Stock Market likes consistency. Stock market like transparency[2], stock market expects respect[3], stock market expect best in class, stock market likes evolved corporates[4]. Stock market expects discipline. The stock market doesn’t just price your business, it judges your behaviour.

Management has to mature to a role and to a mindset where they appreciate that they cannot assume public shareholders and they need to be disclosed whatever is necessary to take them informed decision. Whatever needs their approval cannot be circumvented. Once listed, the company stops belonging to the promoter and starts belonging to trust.

Investors needs sustainable growth either through promoter or someone who is most appropriate at that pace for the company. And therefore, after listing, corporation cannot be considered as alter ego of a promoter but a separate identity. Ego builds companies, but governance sustains them. Therefore ability to have meaningful engagement with investors and to earn qualities, culture, practices, processes, systems and performance that will keep attracting investors at attractive pricing is essential.

2. Resource mobilisation and Deployment

Those companies who go for road show learn so much about their business which they would otherwise not learn even if they spend years in their business. Roadshows don’t just attract investors, they expose blind spots.

Capital markets are not just funding platforms, they are capital allocation judges. If we see distribution of capital across industries has been changing

Table 1: Capital Deployment across industries[5]

Listing and capital market provides continuously evolving framework for effective capital deployment and discipline in its utilisation. Smart capital flows to clear thinking and you will sustained companies have adopted to these expectations and maintained their share in capital market. Success of fund raise is directly proportional to objects of the issue and therefore smartest people on earth decide the capital allocation and retail market follows that. Further, it requires quarterly monitoring and reporting to public about utilisation[6].

One of the reasons why Indian capital market lagged globally is because of multiple factors, but few important factor are our inability to create alternate source for energy and lack of speed and focus on AI[7]. In short, if you want to be ahead of curve in business you need to invest funds at right source and Your investors are your most honest performance dashboard.

3. Discipline

“Success is nothing more than a few simple disciplines, practiced every day.” – Jim Rohn

In fact, being compliant is nothing but being disciplined. Many corporates avoid listing because they are afraid about compliance and compliance cost. Undisciplined success is temporary. Disciplined systems create permanence. Listing forces discipline, resisting it invites decline.

Being listed requires complete mapping of business with confidentiality, disclosure and monitoring conflict of interest across width and breadth. This puts very high level of engagement, alignment and discipline. This one virtue requires to be acquired by any corporation which wants to list. Without this virtue even if any entity lists, it runs a risk of heavy non-compliance which can even put the survival at stake and if mastered, this can guarantee long term and sustainable success.

Be it compliance of related party transactions[8], or related to senior management[9] on boarding or mapping of price sensitive information across organisation[10], putting perfect systems for seamless flow of information across organisation and putting adequate controls and levers to ensure speed of decision with adequate risk mitigation[11] is so critical for successful organisation and listed compliances exactly expect this. These processes and discipline to follow this requires compliance/ regulatory teams, embedding these aspects in every job descriptions and evaluations, investment in systems / processes and review. And while recognising and rewarding the performers any non-performance needs to be tracked and punished ruthlessly. In last 20 years ~13000[12] companies/ individuals got penalised by stock exchange or by SEBI and there are ~7,500+ number of listed companies, this proportion speaks volume about expected disciplined by a listed company in India. Ultimately, we are not running a proprietary concern but a large corporate. What you don’t monitor will eventually control you.

4. Risk

Between success and sustainable success there is one fulcrum which decides the direction, that is risk identification, management and mitigation.

Corporate laws are so vocal about risk[13]. In fact, if there is frequent movement or instability in chief risk officers, price and trust on that corporate impacts. One biggest risk for any corporate is about having weak financial controls and low engagement of auditor vis a vis board of directors. NFRA has been empowered in recent time to come out with more directions on this[14]. Whistle blower, vigil mechanism and protection of whistle blowers has been agenda of regulators and for a evolved corporate it requires strong structure around this[15]. For being listed mastering these aspects is so crucial. Risk based approach of working is so crucial for sustainable success that risk is a subject in almost every graduation and post-graduation. If we want to reduce power of forces which will pull performance of company down, focus on risk is crucial. In recent time when there was accident in one manufacturing facility there was discussion about role of risk committee of that company[16], if corporates are able to invest and prioritise and manage risk appropriately, it will definitely create sustainable wealth for investors. Risk ignored doesn’t disappear, it compounds silently. A weak control environment is a delayed crisis.

5. Conflict of interest

“All great empires die from within.” — Terry Bradshaw

In history we will see several examples of decline of any business or any empire is because of conflict of interest of the ruler/ decision maker. Lack of discipline in handling any conflict of interest is biggest spoiler.

Corporate law has mechanism to map every conflict of interest be at supplier level or customer level[17], or at senior management level[18] or at director level or at investor level[19]. LODR very nicely balances material and non-material conflict of interest. While every transaction with entity where there is some conflict of interest is required to be approved by independent directors only[20] that too only after receiving full and relevant details[21], when it comes to high value transactions involving conflict of interest it can be approved by shareholders who do not have any conflict of interest[22]. This is so strict that out of all such approvals 20% transactions were recommended to be voted against by proxy advisors and 2% transaction could not go through because of this framework in last 5 years. This framework gives so much confidence about robust mechanism to regulate conflict of interest. In last 9 years there are 4 to 5 amendments in regulations which deal with conflict of interest.

Such discipline makes it clear that regulator is very alert and strict about these aspects. In fact, if not followed properly it can trigger debarment of directors from acting as director in that and other companies for five years[23].

This encourages corporate to devise structures which does not have conflict of interest or transactions should be convincible for investors to vote in favour of such transactions. The market forgives mistakes not misalignment.

6. Inclusiveness

Jesse Jackson says “Inclusion is not a matter of political correctness. It is the key to growth.” And Magic Johnson says “The way to be successful is find a way to be inclusive of everybody…” In short without being inclusive, success and sustainable success is not possible and LODR exactly expects this from listed companies. Any culture which is exclusive cannot sustain long.

In fact, LODR not only insists corporates to adopt policies which will facilitate inclusiveness[24], it also insist disclosure of inclusiveness in its annual report[25]. ESG rating declared by ESG Rating agencies indicate how inclusive an organisation is. More and more money, more aware customers and more talented manpower and government subsidies and recognition is not possible without corporation being inclusive. These frameworks requires adopting best practices and because of overall push and pull from investors and regulators corporates will have to become inclusive and they have to ensure that perception is also matching with this. Talent, capital, and trust flow towards inclusive organisations. Exclusivity limits scale: inclusivity multiplies it.

7. Confidentiality, Transparency and Communication

“Don’t speak until its done” this is the simple thumb rule of SEBI Prohibition of Insider Trading Regulations, 2015. Once you are listed a company and its every connected person has to master this science of maintaining confidentiality till event occurs and then complete transparency upon happening of event. This is a habit changer for many corporates. But it is sign of evolved business and person. In last 7 years ~40 companies and ~100 individuals have been penalised by regulator for this violation and total penalty levied is ~36 Crore Rupees.

If any news is published before the formal disclosure done by the company then company has to respond to this immediately[26]. While communication with companies may want to talk liberally about good news, tendency is to speak less about bad news. Once you are listed, you are supposed to be like सुखदुःखे समे कृत्वा लाभालाभौ जयाजयौ II2.38II of Bhagwat Gita. This means whether news is good or bad we should be indifferent and we should see both from equal distance. This is sign of very evolved, fearless and detached persona. When it comes to peace and excellence this is a sign of epitome. Corporates have to earn this before going for listing. Listed companies will have to develop mechanisms to engage and communicate effectively with stakeholders so that news/ announcements are not interpreted to create dis proportionate consequences. Company needs to invest well in communication and investor / public relations.

8. Wealth creation models

Your ability to run business and make profit gives you X and stock listing can give you 10/20/30/50 X for the same profit[27]. Business creates profits. Markets create wealth. Listing converts performance into multiples. The biggest wealth creation engine is not earnings, it is valuation. Shares of a good listed entity is amazing wealth which you can pass on to your successor.

Likewise for employees also ESOP is amazing wealth creation enabler. In fact, ESOPs are no longer merely incentive tools but have become meaningful wealth creators e.g. Vedanta Ltd. alone has reported over ₹2,500 crore of employee wealth creation through ESOPs over a five-year period, reflecting the scale at which value can be shared with employees. Plus, best part is compensation is done by the market and not by the company. ESOPs don’t just compensate employees, they align destinies.  And therefore, coming out with ESOP scheme for employees before listing OR aligning family for share ownership and distribution post demise of founder promoter is very crucial. Many promoters keep their successor tied together via family trusts. As per Prime Database, as on October 2025, among the 2,757 companies listed on the NSE, promoters of ~880 of these companies hold their shares through different trust structures- private, public or Family Trust. This is a great enabler for keeping company control intact while retaining economic benefits for successors. This needs to be mapped before listing and post listing this can create wealth for everyone.

9. Proprietary /Arbitrary approach to Policy based Approach

Put together Companies Act and LODR requires listed companies to adopt ~26 policies ranging from policy related to manpower – compensation – reward – succession – diversity TO policies monitoring conflict of interest or policies on investment and risk mitigations etc. This speaks volumes. This insists corporates to be able to frame long term views and positioning and to be thoughtful about their choices.

Proper framed policies develop culture, give autonomy, cultivates speed with thoughtfulness and alerts about expectations of various stakeholders.

Policies help corporates to maintain alignment of every stakeholders towards corporate vision-mission-goal-values. Policies also provide framework which will make job of executors seamless and increases accountability of every stakeholder.

Policies if weaved properly can be effective replacement of most brilliant and evolved human beings with a very common man at execution level. This is amazing tool and corporate laws expect migration of corporates from arbitrary/ proprietary decision making to policy-based functioning. Number of courses available on policy making in management schools are increasing and this clearly indicates need of Indian corporate world.

10. Moving towards evolved and responsible corporate

GOAL of any organisation is to make profit today and all the time in future and LODR and companies act if implemented in letter and spirit actually promises this. It is a role of company secretary not just to ensure the compliances are done but also to ensure that it is implemented in a manner which transforms company into very evolved corporate.

Conclusion

Whether you list or don’t list, imbibing these highest level of polices, practice, processes, culture and attitude makes any company and its ecosystem a very matured, efficient, effective and sustainable. Listing is optional. Maturity is not.  Sustainable success is not achieved by chance, but by design. Regulation is not a burden; it is a blueprint for excellence. Great companies don’t comply with laws; they evolve through them. Role of company secretary is not just to ensure compliance but to ensure that true benefit of these regulatory expectations transform those companies into a evolved organisation which sustains for hundreds of years

[1] Care ratings IBBI data .

[2] There are almost 37 TYPES of disclosures required under reg. 30 and approx. 61 types of disclosures under LODR

[3] Listed cos generally quarterly calls after publication of fin. Results. They also conduct quarterly calls post disclosure of significant events.

[4] There are some index such as ESG ratings by NSE (https://www.nse-esgrating.com/esg-ratings ), BSE 100 ESG Index, S&P ESG India Index etc, which  and S&P BSE 100 ESG Index. These indices help investors identify ethical firms, promote better corporate governance, and attract sustainable capital.

[5] IBEF 

[6] Reg 32 of LODR provides for quarterly updates on statement of utilisation of funds raised through public issue. Monitoring agency report is also provided if fund raising exceeds

[7] India’s crude oil import dependence (~87–88%), coupled with a fossil fuel–dominated energy mix, underscores a structural reliance on external energy sources despite ongoing transition efforts.
(Source: Energy Statistics India 2026, MoSPI) .

https://www.niti.gov.in/sites/default/files/2023-03/National-Strategy-for-Artificial-Intelligence.pdf

[8] Regulation 23(4) of SEBI (LODR) Regulations, 2015

[9] Regulation 17A (1) of SEBI (LODR) Regulations, 2015

[10] Regulation 3(5) of SEBI (PIT) Regulations, 2015

[11] Regulation 21(4) of SEBI (LODR) Regulations, 2015

[12] Orders of SEBI chairperson/members, orders of SEBI AO and Quasi-Judicial Authorities from 1 January 2020 to 22 April 2026

[13] section 134 of cos act, 2013 and Reg 21 of LODR, Reg 34 of LODR

[14] Corporate Laws Bill 2026 arms NFRA with sweeping enforcement powers, penalties

[15] Reg 22 of LODR provides for listed entity to formulate a vigil mechanism / whistle blower policy for directors and employees to report genuine concerns.

[16] The National Green Tribunal, in In re: Gas Leak at LG Polymers (2020), found prima facie failure of safety systems and imposed strict and absolute liability on the company, directing deposit of ₹50 crore and constituting a high-level committee to examine lapses and preventive measures.

[17] 2(1)(zc)(ii) of LODR defines related party transactions to mean a transaction between listed entity and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries.

[18] Reg. 26 (3) and (5) of LODR

[19] Reg 26 (1), (2) and (3) of LODR

[20] Members of audit committee who are independent director shall approve related party transactions.

[21] RPT ISF June 2025: management of listed entity shall provide information in format specified in RPT Industry Standards.

[22] Regulation 23(4) of LODR: no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not

[23] Section 164 of the Companies Act, 2013

[24] Regulation 17(1)(a) of SEBI (LODR) Regulations, 2015

[25] Regulation 34(2)(f) of SEBI (LODR) Regulations, 2015

[26] Regulation 30(11) of SEBI (LODR) Regulations, 2015 read with Point 4 of Sch A of SEBI PIT Regulations: Prompt dissemination of UPSI that gets selectively disclosed.

[27] P.E of Sensex is 21.63 – BSE website

This article is published on taxmann link below.

https://www.taxmann.com/research/company-and-sebi/top-story/105010000000028367/positioning-ipos-strategically-long-term-success-mantra-opinion

The post Positioning IPOs strategically: Long Term Success Mantra first appeared on MMJC.

Introduction

An Initial Public Offering (IPO) is a major milestone in a company’s journey. It marks the shift from being a private business to becoming a publicly listed one, which brings greater visibility, regulatory oversight, and responsibility. While going public is often seen as a moment of success, the process leading up to it, especially if delayed, can be complex and demanding, and calls for careful oversight by the company’s leadership.

Delays in IPO timelines are more than just setbacks in the scheduling; they create governance challenges that require the Board’s close attention. Whether the delay is due to regulatory comments, market conditions, or the company’s own preparedness, it increases the period during which sensitive information keeps generating within the company. This increases the risk of insider trading and heightens the importance of the Board’s fiduciary duties under the Companies Act, 2013, and compliance responsibilities under SEBI regulations. In such situations, proactive measures like forming an IPO Steering Committee with legal oversight can help maintain control, ensure transparency, and guide the company through the complexities of a prolonged IPO process.

In this article, we explore how directors can navigate their fiduciary responsibilities during IPO delays, manage insider trading risks effectively, and how establishing an IPO Steering Committee can add significant value.

Board’s Fiduciary Responsibilities Amidst IPO Delays

Under Section 166(2)[1] of the Companies Act, 2013, directors are duty bound to act in good faith, promoting the company’s objectives and acting in the best interests of the company, its employees, shareholders, and the community. These duties persist throughout the IPO process, including periods of delay.

During extended IPO timelines, new developments such as financial results, strategic decisions, or regulatory communications may arise. SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018 mandate prompt disclosure of all material developments between the filing of the draft offer document and the allotment of securities[2]. If such information is not disclosed, the company and its officers may face liabilities under Sections 34 and 35 of the Companies Act, 2013, which deal with false or misleading statements in a prospectus. SEBI has also taken enforcement action in the past against companies for providing inaccurate information in their draft offer documents.
Therefore, when an IPO gets delayed, the Board of Directors of such company must not treat it as a passive waiting period it must proactively assess if any new developments have occurred that warrant disclosure and ensure that timely updates are incorporated in the offer documents to avoid regulatory breaches.

For Example: The Quadrant Future Tek Case

A recent settlement order[3] (April 01, 2025) involving Quadrant Future Tek Limited highlights the Board’s continuing responsibility to oversee disclosures even during IPO delays. In this case, a promoter-to-promoter gift of shares occurred after the filing of the DRHP but was disclosed well beyond the 24-hour timeline mandated under Regulation 54[4] of the ICDR Regulations. Although the transaction was non-commercial and did not alter the overall promoter holding, SEBI still pursued enforcement action for delayed disclosure underscoring that all material transactions during the IPO window must be promptly and transparently disclosed. This case serves as a reminder that the Board must stay alert during prolonged IPO processes and ensure that even seemingly routine or internal developments are evaluated for disclosure obligations.

Managing UPSI and Insider Communication Risks Post Draft Offer Document Filing

Once a draft offer document is filed with SEBI, the company comes under the purview of “to be listed company” and the definition of the UPSI inter-alia becomes applicable. Information in the company gets categorized into material information and price sensitive information. As per PIT this price sensitive information has to be ring fenced and person having access UPSI are subject to code of conduct.

Regulation 3(1)[5] of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) clearly prohibits any insider from communicating, providing, or allowing access to UPSI to any person, including other insiders, except where such communication is in furtherance of legitimate purposes, the performance of duties, or the discharge of legal obligations.

In support of this, Regulation 3(5) of PIT Regulations requires companies to maintain a structured digital database (SDD) containing the names of such persons with whom UPSI is shared. This database must be time-stamped and should ensure that any sharing of sensitive information is traceable and auditable.

These safeguards become especially important because Regulation 4(1)[6] of the Insider Trading Regulations assumes that if an insider trades while they are in possession of UPSI, it is presumed that the trade was based on that information. In other words, the insider is considered guilty unless they can prove otherwise.

After filing DRHP the key managerial personnel and board members to merchant bankers, legal advisors, and auditors etc. gain access to a load of Unpublished Price Sensitive Information (UPSI). This includes financials, business strategies, regulatory correspondences, and risk disclosures that are not yet available in the public domain. Hence the board of directors need to be more careful and cautious to avoid violation of the PIT regulations.

During long IPO processes, where new sensitive information keeps coming, up the chances of insider trading, whether intentional or accidental, become much higher. This makes it essential for companies to have strict internal controls and regular monitoring in place and making the designated persons aware of the obligations.

One effective way to institutionalize this vigilance is by establishing an IPO Steering Committee with legal oversight, which can centrally manage disclosures, UPSI tracking, and stakeholder coordination throughout the IPO.

Establishing an IPO Steering Committee with Legal Oversight

Given the complexities of the IPO process, forming an IPO Steering Committee may provide structured oversight. While not mandated by law, such a committee can facilitate coordination between various stakeholders, including management, legal advisors, and merchant bankers.

Typically, such a committee should be constituted soon after the IPO process is initiated, ideally at the time of appointing merchant bankers or finalizing the DRHP outline and should remain in place until the allotment of securities and successful listing on the stock exchange. In some cases, it may be advisable to extend the committee’s oversight until post-listing compliances under SEBI LODR Regulations are fulfilled.

The committee’s responsibilities may include:

• Monitoring the progress of IPO documentation and responding to SEBI queries as per Regulation 25(4) and (5)[7] of the ICDR Regulations.
• Ensuring timely disclosure of material developments in line with Schedule IX of ICDR Regulations.
• Overseeing compliance with insider trading regulations, including the maintenance of structured digital databases under PIT Regulations.
• Coordinating updates to financial statements, ensuring compliance with disclosure requirements.

Conclusion Delays in IPO timelines are not merely pauses in the process but periods that test a company’s commitment to governance and compliance. The Board’s active engagement, adherence to fiduciary duties, and proactive risk management are crucial during these times. By establishing an IPO Steering Committee with legal oversight, companies can navigate the complexities of extended IPO processes, maintain regulatory compliance, and uphold investor confidence

[1] Section 166(2) of Companies Act, 2013:  A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.

[2] SCHEDULE IX of ICDR – public communications and publicity materials:  (4) The issuer shall make a prompt, true and fair disclosure of all material developments which take place between the date of filing offer document and the date of allotment of specified securities, which may have a material effect on the issuer, by issuing public notices in all the newspapers in which the issuer had released pre-issue advertisement under applicable provisions of these regulations;

[3] https://www.sebi.gov.in/enforcement/orders/apr-2025/settlement-order-in-respect-of-mr-mohan-krishnan-abrol-quadrant-future-tek-limited-and-mr-vivek-abrol_93200.html

[4] The issuer shall ensure that all transactions in securities by the promoter and promoter group between the date of filing of the draft offer document or offer document, as the case may be, and the date of closure of the issue shall be reported to the stock exchange(s), within twenty four hours of such transactions.

[5] Regulation 3(1) of PIT Regulations : 3. (1) No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.

[6] No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information……

[7] Regulation 24 of ICDR Regulations:

(4) The lead manager(s) shall call upon the issuer, its promoters and its directors or in case of an offer for sale, also the selling shareholders, to fulfil their obligations as disclosed by them in the draft offer document and the offer document and as required in terms of these regulations.

(5) The lead manager(s) shall ensure that the information contained in the draft offer document and offer document and the particulars as per restated audited financial statements in the offer document are not more than six months old from the issue opening date.

The post IPO Delays Unpacked: The Board’s Role in Governance, Compliance, and Risk Control first appeared on MMJC.

For years, SEBI has pushed Indian capital markets steadily towards a “demat-only” regime. The journey began with listed company shares, extended to unlisted public companies under the Companies Act, and now reaches a new milestone: the IPO gateway itself. With its September 2025 amendment to Regulation 7(1)(c) of the ICDR Regulations, SEBI has expanded the circle of stakeholders who must hold their securities in demat form before filing of a DRHP.

What once applied only to promoters now covers a far wider group such as promoter group, selling shareholders, directors, key managerial personnel (KMPs), senior management, qualified institutional buyers (QIBs), domestic employees, SR shareholders, and regulated financial entities[1]. A parallel amendment brings SME issuers under the same fold.

On paper, this looks like a compliance refinement. In practice, it raises important challenges that companies and their advisors must confront well before the IPO clock starts ticking.

Why SEBI Did This

The amendment aligns capital market rules with the Companies Act “demat discipline” under Rules 9A and 9B[2], which already cover promoters, directors, and KMPs for corporate actions. SEBI goes further by pulling in additional categories. The policy direction is unmistakable: an IPO-bound issuer must come to market with a fully electronic, auditable cap table.

DRHPs Already Filed: Where Do They Stand?

A common question is what happens to DRHPs filed before this amendment. Technically, the rule applies “prior to filing,” so older filings are not non-compliant. Yet practically, SEBI is unlikely to permit progression to RHP without the broader set of holders being dematerialised. Issuers should therefore treat the expanded demat mandate as a must-complete checkpoint by the RHP stage.

The Pressing Issues Practitioners Must Watch

1. The Foreign Employee Blind Spot

The regulation expressly covers only employees exclusively working in India. Foreign employees, therefore, are not included under the “employee” limb. On paper this looks like a carve-out. In practice, it creates a grey area:

• Many Indian companies and services have overseas ESOP pools.
• Indian depositories cannot easily service foreign resident accounts without FEMA and custodial compliance.
• Even if foreign employees are technically exempt, investors and underwriters may demand their holdings be dematerialised for cap-table hygiene.

If a foreign employee is also a director, KMP, or senior manager, they are automatically brought under the demat requirement. For others, the law is silent, but market expectation will not be.

Insight: Companies should plan early for foreign ESOP regularisation, whether through custodial structures, trust arrangements, or advance demat conversions. Leaving this until the RHP stage is an invitation for delays.

2. The “Moving Target” Between DRHP and RHP

Requiring full demat at DRHP sounds clear-cut. But IPOs are dynamic journeys, and cap tables rarely remain static.

• New hires may join senior management after DRHP.
• ESOP exercises often occur in the DRHP–RHP window.
• Corporate actions like bonuses or splits can alter the shareholding.

Each event can introduce new holdings that need dematerialisation, creating a “moving target” problem. For instance, if an employee exercises stock options after DRHP, the shares must be allotted directly in demat form. If a director joins post-DRHP, their shareholding must also be regularised before RHP.

Insight: This transforms Regulation 7(1)(c) from a one-time pre-filing hurdle into an ongoing compliance obligation throughout the IPO process. Companies must design safeguards mandating all post-DRHP issuances to be demat-only, maintaining real-time cap-table trackers, and disallowing any physical share movement until RHP.

Other Practical Implications

• Widening scope beyond Companies Act: SEBI’s regime now goes beyond Rule 9A/9B, raising the compliance bar higher for IPO candidates.
• Disclosure quality: With cap tables fully electronic, DRHP disclosures will be cleaner, reducing SEBI’s observation cycles and boosting investor confidence.

Conclusion

The September 2025 amendment to Regulation 7(1)(c) is more than just a procedural tweak. It forces issuers to confront two pressing realities: the treatment of foreign employees and the management of a moving cap table between DRHP and RHP. Both issues require advance planning, not reactive fixes. For companies, the message is straightforward: an IPO is not only about raising capital it is about arriving at the market with a transparent, reconciled, and dematerialised ownership structure

[1]Regulation 7 of SEBI ICDR Regulations, 2018 (1) An issuer making an initial public offer shall ensure that: 33[(c) all its specified securities held by –

(i) the promoters,

(ii) the promoter group,

(iii) the selling shareholder(s),

(iv) the directors,

(v) the key managerial personnel,

(vi) the senior management,

(vii) qualified institutional buyer(s),

(viii) employees,

(ix) shareholders holding SR equity shares,

(x) entities regulated by Financial Sector Regulators,

(xi) any other categories of shareholders as maybe specified by the Board from time to time,

are in the dematerialised form prior to the filing of the draft offer document;…

[2]Rule 9A and 9B of Companies (Prospectus and Allotment of Securities) Rules, 2014

The post SEBI’s Demat Mandate Expanded: What the ICDR Amendment Means for IPO-Bound Companies first appeared on MMJC.

Many times, people ask me what it takes for a SME to become a listed company? Being a company secretary I can speak for hours on the line of governance and compliance which a listed company needs to follow as compared to closely held company, however, is compliance alone enough to sustain a company in the absence of incremental financial success? In today’s materialist world is it possible even to retain and hire best people to run compliance and governance function without ensuring continuous growth for the SME company?

In my experience, the biggest challenge for SME is to be in mindset of growth and excellence all throughout. Once you are listed, investor becomes one additional critical stakeholder and investor wants growth.

Everyone wants to grow but growth is not free. At times growth needs lot of sacrifice. My experience says unless the leader of the organisation is growth obsessed, organisation goes in maintenance or can even go in slow decay process. In any organisation if some individuals grow financially without being obsessively focused on excellence and growth, consider that someone else is doing this for them.

So, for SME to transform to mainstream listed company, first it needs to master growing and doubling size in predefined timeline. Unless the company cracks this formula while being 100% compliant and ethical , we should not even think about getting listed. And once you are listed you must have lot of processes, controls, protocols like approval of independent director for many business decisions and therefore speed needs to get replaced with extra ordinary planning and exceptional alignment.

Data shows that those companies which are continuously in small cap index are growing at CAGR of ~17 to 20%. And if an entity does not aspire to be in leadership category probably listing is not a good idea.

Once you are listed, it is almost a norm to engage with investors every quarterly after the financial results is declared  and management answers questions of investors. Answering and meeting expectations of investors quarter on quarter is a task and unless entire organisation is wired to work towards it and unless leader ensure vector alignment in the organisation this is not possible.

The companies which were growth obsessed but not disciplined also went to bigger trouble of IBC. Almost 8-10% companies of top 500 companies in India went through IBC process. This highlights that excellence obsessed is a precursor for growth obsession for being a listed company. if we are afraid to fail, if our projects get delayed regularly, if customer satisfaction is less than 70-80%, if employee satisfaction is less than 80% then even if a company grows at times, it will not be sustainable and therefore should not go for listing. Off course these are just few examples but not out of context.

In fact, I suggest and insist every company planning to go for an IPO to behave as if it is a listed company to experience and master this trait. If this works well, either entrepreneur and company realises its true potential, or it accepts that it should not go for listing.

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 Section 166(2) of Companies Act casts duty on every director to ensure that the interest of every stakeholder are addressed.

 Under Regulation 19(4) r/w Schedule III of SEBI (LODR) Regulations, 2015, the appointment of Senior Management requires the recommendation of the NRC. Furthermore, Regulation 23 mandates prior approval of the Audit Committee for all related party transactions

 Under Regulation 30 read with Para A of Part A of Schedule III of the SEBI (LODR) Regulations, 2015, listed entities are required to disclose the schedule of analyst or institutional investor meets at least two working days in advance. Furthermore, audio/video recordings of such calls must be disclosed to the stock exchanges and hosted on the company’s website within 24 hours (or before the next trading day), and written transcripts must be made available within five working days.

 Vector Alignment” is a concept most famously detailed in the book “The 15 Commitments of Conscious Leadership” by Jim Dethmer, Diana Chapman, and Kaley Klemp. it, it cannot sustain.

 https://nsearchives.nseindia.com/web/sites/default/files/inline- files/List%20of%20Companies%20under%20IBC%20and%20ICA_6.xlsx

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Introduction

SEBI has amended the ICDR Regulations, 2018, with effect from 16 March 2026, addressing key gaps in the IPO framework. The amendments primarily focus on :

(i) strengthening the enforceability of lock-in provisions in respect of pledged shares, and (ii) improving the timing and accessibility of abridged prospectus disclosures.

1. The Lock-in Challenge

1.1 Lock-in requirements are central to maintaining discipline in capital raising. However, under the earlier framework, a practical limitation existed. When shares were pledged, the depository system did not have the capability to technically enforce transfer restrictions.

This created a situation where:

• Lock-in obligations existed in law
• But their enforcement depended on contractual arrangements
• And in certain cases, pledge-related events introduced ambiguity

In essence, there was a disconnect between regulatory intent and system capability.

1.2 SEBI has now addressed this gap by introducing a clear mechanism within Regulation 17 of ICDR.

Under the revised framework:

• The issuer is empowered to instruct the depository to restrict transfer of shares subject to lock-in[i]
• The depository marks such shares as non-transferable at a system level
• This restriction operates irrespective of whether the shares are pledged

Importantly, even where:

• the pledge is invoked, or
• the pledged shares are released

the lock-in restriction continues uninterrupted for the entire prescribed period.

This marks a significant shift from contractual enforcement to technological enforcement, ensuring that the lock-in requirement is not merely theoretical but operationally binding.

1.3 Impact on the stakeholders

The amendment ensures that lock-in is now enforced directly through the depository system, making shares non-transferable even if they are pledged. As a result, issuers, depositories, and intermediaries need to coordinate to implement and monitor this properly, lenders will have limited flexibility in dealing with pledged shares during the lock-in period, and advisors must carefully structure and review such transactions under this stricter and clearly enforceable framework.

2. Reworking the Abridged Prospectus: From Late Disclosure to Early Insight

2.1 The second major reform relates to investor disclosures.

Earlier, the abridged prospectus was intended to provide a concise snapshot of the offer. It was made available only at the application stage. By that point, investors had already navigated the decision-making process, often relying on lengthy and complex offer documents.

This approach limited the effectiveness of the abridged prospectus as a decision-support tool.

2.2 The revised framework fundamentally repositions the role of the abridged prospectus.

Now:

• A Draft Abridged Prospectus (DAP) is required to be prepared and filed along with the DRHP[ii]
• It follows a standardised structure, ensuring uniformity across issuers[iii]

Further, the mode of dissemination has been modernised:

• Physical copies are replaced with QR codes and hyperlinks[iv]
• Application forms act as access points, not carriers of documents

2.3 Standardisation of Disclosure : A Structured Investor Summary

The amendment introduces a clearly defined 12 part  structure for the abridged prospectus, requiring disclosure of key investor-relevant information, including:

• Overview of the issue and business
• Industry summary
• Promoter details
• Objects of the issue
• Pre- and post-issue shareholding
• Financial highlights
• Key performance indicators
• Top risk factors
• Cost of acquisition
• Board and KMP details
• Auditor qualifications
• Outstanding litigations

Additionally, disclosures relating to Contingent Liabilities and Related Party Transactions[v] are now elevated as standalone sections in the offer document, indicating a shift in regulatory emphasis.

2.4 Before and After : A Structural Comparison

Lock-in Framework

Abridged Prospectus Framework

2.5 Impact of the amendment

The introduction of the Draft Abridged Prospectus (DAP) impacts issuers, merchant bankers, and legal advisors, as it becomes a mandatory part of the DRHP filing process and must be prepared in a standardised format at an earlier stage. For companies that have already filed their DRHP prior to the amendment, the requirement would generally apply at the stage of updating or refiling the DRHP/RHP, meaning they may need to prepare and align the DAP before proceeding further in the issue process. From an implementation perspective, while QR code–based access simplifies investor outreach, practical challenges may arise in ensuring correct linkage, version control (especially when documents are updated), seamless accessibility across devices, and maintaining consistency between the DRHP, abridged prospectus, and linked disclosures, thereby requiring careful coordination and verification before circulation.[vi]

Conclusion

The 2026 amendments reflect a clear regulatory direction, the one that prioritises enforceability and accessibility.

On one hand, SEBI has ensured that lock-in provisions are backed by system-level controls, eliminating operational loopholes. On the other, it has transformed the abridged prospectus from a procedural requirement into a meaningful disclosure tool.

Together, these changes signal a move towards a more integrated, technology-driven and investor-focused IPO framework; where compliance is not only mandated, but effectively delivered.

[i] Regulation 17 (2) of ICDR: Subject to sub-regulation (1), where lock-in of the specified securities cannot be created, the depositories shall, upon receipt of instructions from the issuer, record such securities as “non-transferable” for the duration of the applicable lock-in period

[ii] Regulation 25(2) of ICDR The lead manager(s) shall submit the following to the Board along with the draft offer document:

…

(d) a draft abridged prospectus as per Part E of Schedule VI.

…

[iii] Schedule VI, Part E, of ICDR Regulations

[iv] Regulation 34(2), 131(2), 255(2), Schedule VI, Part E (VI), of ICDR Regulations

[v] Schedule VI, Part A, Clause (6), ICDR Regulations

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India’s capital markets have evolved significantly over the last decade. IPO sizes have grown larger, valuations have increased sharply, and several companies now reach market capitalisations that were once seen only in global markets.

Against this backdrop, the Government has amended the Securities Contracts (Regulation) Rules, 1957 (SCRR) through the Securities Contracts (Regulation) Amendment Rules, 2026, notified on 13 March 2026, effective on the date of their publication in the Official Gazette.

The amendment revises Rule 19(2)(b), which prescribes the minimum offer and allotment to the public required for listing on a recognised stock exchange.

While the earlier framework applied a relatively simple threshold, the amended rule introduces a graduated public offer structure based on the size of the company’s post-issue capital. The change reflects the realities of modern capital markets and is particularly relevant for large and mega IPOs.

The Earlier Framework

Before this amendment, the listing requirement under Rule 19[1] of SCRR broadly required the following:

• At least 25% of each class of equity shares to be offered to the public; or
• At least 10% public offer, where the post-issue capital exceeded ₹4,000 crore, subject to the condition that the company would increase public shareholding to 25% within three years of listing.

This framework worked reasonably well when most IPOs were within a few thousand crore rupees. However, with the emergence of very large companies, the rule sometimes resulted in extremely large issue sizes simply to satisfy regulatory thresholds.

What the 2026 Amendment Introduces

The 2026 amendment replaces the earlier simplified framework with a tiered structure linked to the company’s post-issue capital.

Under the amended Rule 19(2)(b), the minimum public offer requirement now varies depending on the size of the company.

Revised Public Offer Requirements

The amendment therefore recognises that very large companies may not need to dilute a large percentage of equity at the time of listing, while still ensuring that a meaningful amount of shares are available in the market.

Gradual Increase in Public Shareholding

Even though companies may list with a lower public float under this framework, the law continues to require companies to increase public shareholding over time.

This ensures that market liquidity and investor participation are maintained in the long run.

Practical Impact on Companies

The amendment is likely to have several practical implications for companies planning to go public.

1. Listing of large companies made easier:

For companies with very large valuations, the earlier public float framework often resulted in IPO sizes far exceeding realistic market absorption levels. Using LIC’s IPO as a reference point, a company valued at about ₹6 lakh crore would have required an issue size of nearly ₹60,000 crore if a 10% public float were mandated, which would have been difficult for the market to absorb in one transaction. The amended Rule 19 now addresses this challenge by allowing such companies to list with a minimum public offer of ₹15,000 crore and at least 1% equity, instead of a fixed percentage threshold. By introducing this value-based threshold, the amendment enables large companies to access public markets without forcing excessively large IPO sizes, while still ensuring gradual compliance with minimum public shareholding norms.

2. Greater flexibility in IPO structuring

Earlier, companies sometimes had to increase issue size simply to meet the regulatory percentage requirement.

Under the new framework, companies may be able to design more efficient IPO structures, where the issue size reflects:

• capital requirements of the company; and
• market conditions at the time of listing.

This may also allow promoters to phase dilution through future transactions, such as:

• Offer for Sale (OFS)
• Qualified Institutional Placement (QIP)
• Follow-on public offers.

3. Potential increase in large IPOs

The amendment could encourage large private companies and unicorn-stage companies to consider listing in India.

For many high-valuation companies, offering 25% at listing could translate into extremely large IPO sizes. The new framework reduces this barrier and may therefore make the Indian market more attractive for mega listings.

4. Extra Time for MPS Compliance, But Past Defaults Still Liable

Companies already listed and which were unable to achieve the prescribed minimum public shareholding (MPS) may avail the benefit of the revised timelines under the Securities Contracts (Regulation) Amendment Rules, 2026 to regularise their MPS; however, such relaxation does not absolve past non-compliances, and the stock exchanges retain the authority to impose fines or penalties for breaches occurring prior to the commencement of the amended rules.

Conclusion

The SCRR Amendment Rules, 2026 represent an important step in modernising India’s listing framework.

By introducing a graduated public offer structure, the amendment recognises the changing scale of Indian companies and the evolving nature of the IPO market.

For companies planning to list, the amendment offers greater flexibility in structuring IPOs and managing promoter dilution. For the market as a whole, it may facilitate more large-scale listings in India, while continuing to ensure sufficient public participation over time. In that sense, the amendment reflects a broader policy objective of making India a more attractive destination for large and global-scale IPOs while maintaining strong market integrity

[1] Rule 19(2) of SCRR

 (b) (i) At least twenty five per cent. of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document; or

(ii) At least ten per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than four thousand crore rupees:

Provided that the requirement of post issue capital being more than four thousand crore rupees shall not apply to a company whose draft offer document is pending with the Securities and Exchange Board of India on or before the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, if it satisfies the conditions prescribed in clause

(b) of sub-rule 2 of rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed prior to the date of such commencement:

Provided further that the company, referred to in sub clause (ii), shall increase its public shareholding to at least twenty five per cent, within a period of three years from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India.

(c) Notwithstanding anything contained in clause (b), a public sector company, shall offer and allot at least ten per cent, of each class or kind of equity shares or debentures convertible into equity shares to public in terms of an offer document.

This article is published on the taxguru link below.

https://taxguru.in/corporate-law/scrr-rule-19-amendment-means-large-ipos.html#:~:text=Listing%20of%20large%20companies%20made%20easier%3A&text=The%20amended%20Rule%2019%20now,of%20a%20fixed%20percentage%20threshold.

The post Big IPOs Just Got Easier: Understanding the 2026 Amendment to SCRR Rule 19 and Its Impact on the Indian IPO Market first appeared on MMJC.