The Securities and Exchange Board of India (SEBI) is set to convene its highly anticipated board meeting on June 18, 2025, with an expansive regulatory agenda covering a wide range of capital market reforms. From easing delisting norms for Public Sector Undertakings (PSUs) to offering greater flexibility to Alternative Investment Funds (AIFs) and streamlining Qualified Institutional Placement (QIP) norms, the decisions expected at this meeting are poised to significantly reshape India’s capital market framework.
Highlights:
Board to discuss treating REITs/InvITs as equity to enable index inclusion.
Separate voluntary delisting norms proposed for government-owned PSUs.
Easier ESOP issuance for startup founders likely to be greenlit.
Flexibility in AIF co-investments and simplified FPI norms on agenda.
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REITs and InvITs May Be Classified as Equity Instruments
One of the most awaited regulatory decisions concerns the classification of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as equity instruments. Industry participants have long demanded this shift to facilitate the inclusion of these instruments in benchmark equity indices, improving their visibility and investor access.
SEBI is also likely to raise mutual fund exposure to REITs and InvITs, with equity fund NAV allocation increasing from 10% to 20%, and debt fund limits staying at 10%. Other proposed changes include easing compliance related to quarterly disclosures, clarifying minimum public unit holding definitions, and adjusting negative cash flows at the holding company level.
Highlights:
Proposal to treat REITs/InvITs as equity for regulatory and index purposes.
MF equity exposure cap proposed to rise to 20%.
Enhanced clarity on compliance, cash flow adjustments, and reporting.
New Framework for Voluntary PSU Delisting
SEBI is set to introduce a dedicated carveout for delisting government-owned companies, which often face challenges due to low public float, limited liquidity, and poor business outlooks. Current delisting norms have made exits financially prohibitive for the government due to inflated market prices stemming from low free float.
The separate framework would relax delisting requirements and potentially allow differential treatment for PSUs with over 90% promoter holding, thereby streamlining the process and reducing costs for the exchequer.
Highlights:
SEBI proposes new delisting rules for PSUs with over 90% promoter holding.
Aims to address low liquidity, outdated models, and high market premiums.
Expected to revive the stalled PSU delisting pipeline.
Start-Up Founders May Get ESOP Flexibility Before IPO
In a move to foster India’s start-up ecosystem, SEBI will deliberate amendments to Share Based Employee Benefits and Sweat Equity Regulations, 2021, allowing startup founders to retain ESOPs even after being classified as promoters prior to an IPO.
Under current rules, once founders are tagged as promoters, they become ineligible for ESOPs. SEBI’s proposed revision would permit founders to exercise ESOPs granted at least one year before IPO filing, resolving a long-standing compliance challenge in startup IPOs.
Highlights:
ESOP issuance may be allowed to startup promoters pre-IPO.
Founders can retain ESOPs granted 1 year prior to IPO.
Rule change aims to support founder incentives and IPO readiness.
QIP Norms May Be Streamlined for Ease of Doing Business
SEBI is also looking to simplify the regulatory process for Qualified Institutional Placements (QIPs), which currently involves filing voluminous and repetitive documents. The regulator aims to allow companies to submit only relevant information, reducing redundancy and ensuring faster market access for capital raising.
The updated QIP rules would enable corporates to cut down preparation time and improve capital-raising efficiency, particularly useful for mid-cap and small-cap firms.
Highlights:
QIP norms to be simplified by eliminating redundant documentation.
Move aimed at speeding up equity fundraising for listed entities.
Helps smaller firms tap market with less regulatory burden.
AIFs Could Get More Co-Investment Flexibility
Another major proposal includes offering Alternative Investment Funds (AIFs) more leeway in providing co-investment opportunities to investors. SEBI may allow AIFs to launch a co-investment vehicle (CIV) as a separate scheme within the fund, thereby formalizing and regulating this popular private equity practice.
In addition, AIF managers may be permitted to offer advisory services to investors, regardless of whether the AIF has already invested in the listed securities—enabling wider investor customization and strategic alignment.
Highlights:
Co-investment schemes (CIVs) may be allowed under AIF structure.
AIF managers could be allowed to advise investors beyond AIF holdings.
Move formalizes co-investing and aligns fund managers with LPs.
FPI Norms to Be Relaxed for Sovereign Debt-Only Investors
SEBI is expected to relax norms for Foreign Portfolio Investors (FPIs) investing exclusively in Indian Government Bonds (IGBs). Recognizing the low-risk profile of such instruments, the regulator may simplify the registration and compliance requirements for these FPIs, making Indian debt markets more attractive globally.
This aligns with broader efforts to attract long-term stable capital inflows and improve India’s bond index inclusion prospects.
Highlights:
FPIs investing only in Indian Govt Bonds to get relaxed compliance norms.
Simplified registration and reduced monitoring obligations.
Aimed at encouraging stable, low-risk capital flows.
Executive Appointments and Deferred Clearing Corporation Proposal
SEBI is also likely to approve the appointment of new Executive Directors (EDs), particularly for the legal and IT departments. The increasing workload, especially with ongoing litigations and cyber governance, has necessitated departmental strengthening.
However, the proposal to demerge clearing corporations from stock exchanges will likely not be tabled. The idea aims at financial and operational independence of clearing entities, but divergent industry views and the need for further discussion have stalled the move.
Highlights:
Appointment of new EDs for IT and Legal departments on board agenda.
Demerger of clearing corporations deferred due to unresolved industry concerns.
Proposal still under active discussion but not ready for board nod.
Settlement Schemes for NSEL Brokers and VCF Violations
SEBI may also present settlement schemes for commodity brokers involved in the NSEL (National Spot Exchange Limited) case and for entities violating legacy Venture Capital Fund (VCF) regulations. These schemes will be tabled as information memoranda rather than board approvals, indicating no immediate regulatory changes but offering pathways to resolution.
These targeted settlement frameworks aim to clear backlogs of enforcement actions, enhance regulatory compliance, and free up industry bandwidth for forward-looking reforms.
Highlights:
NSEL broker settlement scheme likely to be shared for information.
VCF violation resolution scheme also expected to be presented.
Designed to ease regulatory burdens and expedite legacy cases.
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