Sebi Unleashes Big Bang Reforms: ESOPs for Startup Founders, Easier PSU Delisting, and Foreign Debt Push

The Securities and Exchange Board of India (Sebi) on Wednesday cleared key reforms to heighten investor confidence, give strength to startups, and make Indian markets more appealing to international capital.

Most notable among the announcements were ESOP eligibility for startup founders after an IPO, voluntary delisting regulations for public sector undertakings (PSUs), increased flexibility for alternative investment funds (AIFs), and relaxed norms for foreign investors in government papers.

Founders Can Now Retain ESOPs After IPO

In a startup-changer, Sebi will now permit founders to hold on to employee stock ownership plans (ESOPs) after their firms list. Till date, founders were considered “promoters” when filing for an IPO—excluding them from ESOP benefits.

To avoid misuse, Sebi has made ESOP grants subject to a one-year waiting period before IPO filing so that the scheme isn’t misused to take sharp insider profits.

This will continue to bring founders and shareholders closer,” said Sebi, emphasizing the importance of rewarding long-term value creation.

NSEL Broker Settlement Under Review

Sebi also reviewed a potential settlement scheme for brokers involved in the NSEL scam, with over 300 show-cause notices pending. The plan, if approved under Sebi’s consent regulations, could bring long-awaited closure to a decade-old scandal.

With these bold steps in Chairperson Tuhin Kanta Pandey’s second board meeting, Sebi is sending a clear signal: India’s capital markets are open for innovation, investment, and inclusivity.

More Muscle to AIFs and Large Investors

SEBI has cleared co-investment vehicles (CIVs) under AIFs for providing opportunities to big investors to co-invest in unlisted entities with the AIF—raising access to quality deals.

The AIF managers can also provide advisory services across investor classes now, increasing operational flexibility and professional fund management.

Relaxed Conditions for Foreign Investors in Sovereign Debt

Understanding the low-risk profile of Indian government bonds, Sebi has eased registration and compliances for foreign portfolio investors (FPIs). The step is likely to draw long-term, stable international capital to India’s sovereign debt market.

PSUs Can Voluntarily Delist Now

Supporting the government’s strategic disinvestment plan, Sebi has permitted PSUs to voluntarily delist—a process that was hitherto slowed by red tape and opposition.