SEBI's June 2025 Board Meeting: Game-Changing Reforms for Indian Capital Markets
The Securities and Exchange Board of India (SEBI) delivered a comprehensive package of regulatory reforms during its June 18, 2025 board meeting, introducing measures that promise to reshape India's capital market landscape. These strategic decisions address long-standing issues while streamlining processes for businesses and investors alike.
Revolutionary Changes for Public Sector Enterprises
In a landmark decision, SEBI introduced simplified delisting norms for Public Sector Undertakings (PSUs) with government holdings of 90% or above. Under the new framework, these companies can now delist at a fixed price with just a 15% premium over the floor price. This eliminates the previously required two-thirds public shareholder approval, significantly accelerating the government's disinvestment initiatives.
This move is expected to unlock substantial value for the government while providing clearer exit pathways for PSU investments that no longer require public market presence.
Startup Founders Get Major Relief on ESOPs
SEBI addressed a critical concern for India's startup ecosystem by allowing founders to retain their Employee Stock Ownership Plans (ESOPs) even after Initial Public Offerings (IPOs). This decision recognizes the unique nature of startup compensation structures where founders often accept equity instead of traditional salaries during the company's growth phase.
To prevent potential misuse, the regulator has implemented a one-year cooling-off period between ESOP grants and IPO filing. This balanced approach ensures alignment with shareholder interests while supporting entrepreneurial innovation.
Enhanced Flexibility for Foreign Portfolio Investors
Recognizing the need to attract long-term global capital, SEBI has simplified regulations for Foreign Portfolio Investors (FPIs) investing exclusively in Indian Government Bonds. The new framework covers investments through both the Voluntary Retention Route (VRR) and Fully Accessible Route (FAR), making India's sovereign debt market more accessible to international investors.
This strategic move is likely to boost foreign investment in government securities, supporting the country's fiscal requirements while deepening bond market liquidity.
Merchant Banking and Capital Raising Efficiency
SEBI reversed its earlier December 2024 decision by allowing merchant bankers to conduct non-SEBI regulated activities within the same firm. This eliminates the previously mandated requirement to separate such activities into distinct entities, reducing operational complexities and compliance costs.
Additionally, the regulator approved streamlined documentation for Qualified Institutional Placement (QIP) processes, reducing duplication and focusing on relevant disclosures to make capital-raising more efficient for companies seeking institutional funding.
Addressing Legacy Issues Through Settlement Schemes
In a move to clear long-pending regulatory matters, SEBI approved a one-time settlement scheme for brokers involved in the National Spot Exchange Limited (NSEL) case, addressing over 300 show-cause notices that have been hanging over the industry.
A similar settlement mechanism was proposed for violations of erstwhile Venture Capital Funds (VCF) regulations, providing closure to legacy compliance issues that have been affecting market participants.
Innovation in Alternative Investment and Mutual Funds
SEBI introduced co-investment opportunities within Alternative Investment Funds (AIFs) through a separate Co-Investment Vehicle (CIV) scheme. This enhances flexibility for investors while ensuring uniform exit mechanisms to protect main scheme participants.
For mutual funds, the regulator raised investment limits in REITs and InvITs from 10% to 20% of Net Asset Value (NAV) under equity schemes, while allowing their classification as equity instruments for index eligibility purposes.
Technology and Transparency Enhancements
SEBI mandated dematerialization of shares for key personnel before filing Draft Red Herring Prospectus (DRHP), ensuring complete electronic holding at the time of listing. This move enhances transparency and reduces settlement risks in public offerings.
The board also formed a working group to explore unbundling of trading and clearing charges, aiming to ensure clearing corporations maintain independent funding structures for enhanced system stability.
Social Impact and ESG Initiatives
SEBI approved modifications to the Social Stock Exchange framework, providing greater flexibility in fundraising and disclosure requirements for social enterprises. Additionally, ESG rating providers will now have regulated access to non-public ESG data from listed companies, improving the quality and comprehensiveness of sustainability assessments.
Market Impact and Future Outlook
These comprehensive reforms signal SEBI's commitment to balancing market development with investor protection. The measures are expected to enhance market efficiency, reduce compliance burdens, and attract both domestic and international capital to Indian markets.
For retail investors, these changes mean better-functioning markets with improved transparency and reduced systemic risks. Institutional investors benefit from streamlined processes and enhanced investment opportunities across asset classes.
The regulatory package demonstrates SEBI's proactive approach to addressing evolving market needs while maintaining robust oversight mechanisms. As these reforms get implemented over the coming months, market participants should closely monitor their impact on trading volumes, investment flows, and overall market dynamics.
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