Summary: SEBI has proposed amendments to streamline India’s IPO process through a consultation paper. The proposals address two critical areas — enabling lock-in compliance for pledged non-promoter shares and introducing focused offer document summaries to enhance accessibility for retail investors. These changes aim to resolve practical challenges faced by IPO-bound companies, while simplifying complex disclosure requirements for better investor comprehension.
Introduction
The Securities and Exchange Board of India (“SEBI”) has issued a consultation paper, dated November 13, 2025, proposing amendments to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (the “ICDR Regulations” and such consultation paper as the “Consultation Paper”).
The Consultation Paper addresses two key areas — first, lock-in requirements for pledged non-promoter shares, a challenge that many IPO-bound companies with wide public shareholding have been grappling with; and second, rationalisation of disclosure requirements through enhanced offer document summaries.
Below is a summary of the key proposals outlined in the Consultation Paper.
Lock-in of pledged shares
As per existing regulations, the entire pre-issue capital (subject to certain exceptions) must be locked-in for the prescribed period. Existing depository systems do not permit lock-in of pledged shares. Consequently, compliance with the aforesaid regulations becomes challenging, unless the pledge is removed. Removing such pledge would require lender consent, to be obtained by the shareholder. Often such discussions are neither pursued nor facilitated by uninterested or unidentifiable shareholder-cum-borrowers whose shares are subject to pledge.
To create an enabling framework for pledging locked-in shares held by non-promoter shareholders, SEBI has proposed a three-fold approach to facilitate the necessary compliance for IPO-bound companies:
Amendment to Articles of Association: The IPO bound company must amend its articles of association for treating pledged shares as locked-in shares for the purposes of the ICDR Regulations.
Issue of Notice: The IPO bound company will issue appropriate notice to all existing lenders, informing them about the aforesaid amendment to the articles of association of the issuer, (i) at the time of amending the articles of association and (ii) prior to filing of the draft offer document with SEBI.
Obligation of Depositories: It is proposed that the depositories will record such securities as “non-transferable” for the duration of the pledge.
In the Consultation Paper, SEBI has indicated that this proposal has been discussed with select non-banking financial companies (“NBFCs”), and such NBFCs have expressed their concurrence. Since lenders would be restricted from selling such shares in the open market upon invocation of the pledge, suitable modifications to the pledge agreements may be required to safeguard against share price movements.
Rationalisation of issuer-related information
In the Consultation Paper, SEBI has observed that offer documents are often voluminous and complex, making them difficult to comprehend, particularly for retail investors. As a result, retail investors often rely on secondary and unregulated sources of information, such as grey market trends and unverified social media posts, for making investment decisions. Accordingly, SEBI has proposed to modify the requirements around availability of issuer-related information to facilitate retail participation.
SEBI has accordingly proposed creating a summary of the offer document to rationalise documentation requirements and streamline the public issue process. Given that offer documents already contain a chapter on offer document summary (as mandated under the ICDR Regulations), SEBI has emphasised on rationalising it to make it a “focused” and “concise” document, and thereafter making such summary available separately to increase engagement of retail investors. SEBI has proposed that such ‘offer document summary’ be submitted along with the draft offer document and offer document. This summary will be hosted on the websites of the issuer, SEBI, stock exchanges, and the merchant bankers associated with the IPO.
Consequently, SEBI has proposed to dispense with the requirement of an abridged prospectus (a concise offer document prepared in accordance with the ICDR Regulations).
Conclusion
The proposals outlined in the Consultation Paper represent a progressive step towards enhancing ease of doing business for issuers in the Indian capital market. The proposed amendments to the ICDR Regulations address certain practical challenges that have hindered the efficient conduct of public offerings, particularly for companies with diverse shareholding structures. Further, it also addresses the long-standing criticism that offer documents are excessively lengthy and complex for investors to navigate effectively. Rather than mandating a reduction in the comprehensive offer documents required for regulatory compliance, SEBI has identified a balanced approach through the ‘offer document summary’. This approach maintains detailed offer documents for SEBI scrutiny, while simultaneously providing investors with streamlined summaries for easier comprehension. Importantly, investors who prefer access to complete information can still obtain the full offer document, thereby preserving choice, while enhancing accessibility for retail investors.
The Consultation Paper is available here and the last date for sending comments is December 4, 2025.
For further information, please contact:
Manshoor Nazki, Partner, Cyril Amarchand Mangaldas
manshoor.nazki@cyrilshroff.com
