In a significant move to simplify compliance and encourage greater retail investment, the Securities and Exchange Board of India (Sebi) approved key amendments to public issue norms on Wednesday, 17 December. The capital markets regulator greenlit changes to lock-in period requirements for initial public offerings (IPOs) and introduced a new, technology-driven disclosure framework.
Streamlining Lock-in Requirements for Pledged Shares
The Board approved amendments aimed at streamlining public issue requirements to enhance ease of doing business and increase retail investor engagement. A primary change addresses practical challenges faced by some issuers regarding lock-in compliance when shares are pledged by non-promoters before the IPO.
Under the new system, if a lock-in on specified securities cannot be formally created, depository participants will now mark such securities as 'non-transferable' for the entire duration of the applicable lock-in period. This procedure ensures compliance even when shares are pledged, according to Sebi's release.
The current norm mandates a six-month lock-in for the entire pre-issue capital held by persons other than promoters, effective from the date of allotment in the IPO. This rule applies with exceptions for certain specified categories of shareholders. The new mechanism makes these lock-in requirements self-enforcing, even if pledged shares are invoked or released.
A New Tech-Enabled Disclosure Framework for Investors
In a parallel push to boost primary market participation, Sebi approved a focused, concise, and standardised summary of IPO documents. This new document, called a 'draft abridged prospectus,' will be available to potential bidders right from the Draft Red Herring Prospectus (DRHP) filing stage.
Currently, companies must file all material aspects of a public issue in the DRHP and the final offer document. Under the new mandate, companies will need to file an abridged prospectus at both the DRHP and the Red Herring Prospectus (RHP) stages.
This initiative follows consultations and public feedback on a discussion paper from November 2025, with deliberations also involving the Primary Markets Advisory Committee. Sebi Chairman Tuhin Kanta Pandey highlighted that the draft abridged prospectus will feature a QR code, allowing investors quick digital access to key issue information.
Implications for the Market and Investors
These regulatory tweaks represent a dual-focused effort by Sebi. First, they resolve a technical hurdle in lock-in compliance, making the process more robust for market intermediaries and issuers. Second, and perhaps more impactful for the common investor, is the introduction of a simplified, accessible prospectus summary.
The tech-enabled abridged prospectus, accessible early via QR code, is designed to demystify IPO documents for retail investors, potentially leading to more informed and confident participation in the primary market. Together, these changes aim to create a more efficient and investor-friendly ecosystem for public issues in India.
