Securities and Exchange Board of India ("SEBI") on March 4, 2025 notified amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("SEBI ICDR Regulations"), implementing, inter alia, the recommendations of the Expert Committee. The Expert Committee was established to review the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR") and the SEBI ICDR Regulations, from the point of view of facilitating ease of doing business, and to harmonize the provisions of LODR and the SEBI ICDR Regulations. These amendments (hereinafter referred to as the "ICDR Amendments 2025") introduce various changes and additions to the existing disclosure and other requirements, governing the framework of issuance of specified securities under the SEBI ICDR Regulations.
This article discusses the key amendments to the SEBI ICDR Regulations which came into force on March 8, 2025, except the amendments related to the rights issue by a listed entity, which shall come into effect on the 31st day of their publication in the Official Gazette, and shall be applicable to rights issues that are approved by the board of director of the listed issuer after the amendments become applicable.
Stock Appreciation Rights
In accordance with Regulation 5(2) of the SEBI ICDR Regulations, an issuer is not eligible to make an initial public offer ("IPO") if there are any outstanding convertible securities or any other rights which would entitle any person with an option to receive equity shares of the issuer company. However, this restriction does not apply to: (i) outstanding options granted to employees pursuant to an employee stock option scheme; and (ii) fully paid-up outstanding convertible securities which are required to be converted on or before the date of filing of the red herring prospectus or the prospectus, as the case maybe.
The Expert Committee noted that: (i) The SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 recognize stock appreciation rights as a share-based employee benefit which can be provided by listed entities to their employees; and (ii) Regulation 56 of the SEBI ICDR Regulations permits a further issue of shares after the date of filing of the draft red herring prospectus ("DRHP"), provided that such issuance is disclosed in the DRHP. Accordingly, the Expert Committee recommended permitting stock appreciation rights ("SARs") to remain outstanding until the date of filing of the red herring prospectus.
The recent ICDR Amendments, 2025, in line with the recommendations of the Expert committee, have now added outstanding SARs (granted to employees pursuant to a stock appreciation right scheme), which are fully exercised for equity shares prior to the filing of the red herring prospectus or the prospectus (as the case may be), to the existing exemption under Regulation 5(2).
It shall be noted that the relevant disclosures regarding such SARs and the scheme, and the total number of equity shares resulting from the exercise of such rights, shall be made in the draft offer document and offer document.
Additionally, the relaxation from the lock-in requirement as applicable for equity shares allotted to employees under employee stock option (or employee stock purchase scheme) have also been made available for equity shares allotted to employees under stock appreciation rights plan. In this regard, an explanation has been added under Regulation 17 of the SEBI ICDR Regulations, that such relaxation from lock-in is also applicable on shares received pursuant to bonus issue against equity shares allotted pursuant to an employee stock option or employee stock purchase scheme or a stock appreciation right scheme.
Date of computation of the threshold for shareholders participating in the offer for sale in an IPO under Regulation 8A:
The Regulation 6(2) of the SEBI ICDR Regulations, inter alia, provides for the eligibility criteria for an issuer who does not satisfy the eligibility conditions as mentioned under Regulation 6(1) of the SEBI ICDR Regulations. Such issuer shall be eligible to make an IPO, only if the issue is made through the book-building process, and undertakes to allot at least seventy five percent of the net offer to the qualified institutional buyers.
The quantum of shares that can be offered for sale by the selling shareholders in an IPO under Regulation 6(2), is restricted under Regulation 8A of the SEBI ICDR Regulations, which inter alia provides that where the draft offer document is filed under Regulation 6(2), the shares offered for sale by shareholders holding: (i) more than twenty percent of the pre-issue shareholding of the issuer (based on fully diluted basis), shall not exceed more than fifty percent of their pre-issue shareholding on fully diluted basis; and (ii) less than twenty per cent of the pre-issue shareholding of the issuer (based on fully diluted basis), shall not exceed more than ten percent of the pre-issue shareholding of the issuer on fully diluted basis.
Regulation 8A intended to restrict the equity shares offered for sale in an IPO under Regulation 6(2), however, it was observed by the Expert Committee that clarity should be provided to ensure, that the total number of shares that are eligible to be sold by a shareholder (whether as part of the IPO or through other secondary transfers prior to the issue or IPO), does not exceed the thresholds set out under Regulation 8A (which shall be calculated from the date of filing the draft offer document).
Pursuant to the above observations, the ICDR Amendments 2025 have clarified that the limits set out under Regulation 8A (as mentioned in the para above) shall be calculated with reference to the shareholding as on the date of filing of the draft offer document, and shall apply cumulatively to the total number of shares offered for sale to the public and any secondary sale transactions prior to the issue.
Change in the definition of the term 'Capital Expenditure' with respect to the lock-in period for minimum promoters' contribution
As per Regulation 16 of the SEBI ICDR Regulations, in case the majority of the issue proceeds (excluding the portion of offer for sale) is proposed to be utilized for capital expenditure, the minimum promoters' contribution shall be locked in for a period of three years, and promoters' holding in excess of minimum promoters' contribution for a period of one year from the date of allotment in the IPO.
The explanation to Regulation 16 of the SEBI ICDR Regulations states that 'capital expenditure' shall include civil work, miscellaneous fixed assets, purchase of land, building and plant, and machinery, etc.
The ICDR Amendments 2025 have now expanded the definition of 'capital expenditure' to include repayment of existing loans that may have been taken for the purpose of such capital expenditure. Thus, if the object of the issue is to use the issue proceeds for the repayment of loans that may have been taken for the purpose of such capital expenditure, then the lock in requirement for the securities held by the promoters shall be as per the provisions of Regulation 16.
Further, it shall be noted that a new explanation to Regulation 15 of the SEBI ICDR Regulations has been inserted in relation to computation of minimum promoters' contribution. In this regard, the price per share for determining the securities ineligible for minimum promoters' contribution, shall be determined, after adjusting for corporate actions undertaken by the issuer, such as share split, bonus issue etc.
Reporting of pre-IPO placement
Prior to the ICDR Amendments 2025, Regulation 54 under Chapter II (IPO on Main Board) of the SEBI ICDR Regulations, required reporting of all transactions in securities by the promoter and the members of the promoter group between the date of filing of the draft offer document or offer document (as the case may be) and the date of closure of the issuance, to the stock exchange(s) within twenty-four hours of such transactions.
In relation to the above, the Expert Committee suggested that to enhance transparency and information available for investors, it is recommended to include the reporting requirements for pre-IPO transactions under SEBI ICDR Regulations, as such disclosure shall ensure that details related to pre-IPO transactions (such as number of shares issued, pricing, total consideration) are available to public investors subsequent to the transaction, and visible to all public investors on websites of the stock exchange(s). Such disclosure and availability of information in public domain, shall enhance transparency and increase the ease of doing business for the investors. For this purpose, the Expert Committee suggested, that any proposed pre-IPO placement should be reported to the stock exchange(s) within twenty-four hours of such pre-IPO transactions.
Accordingly, the ICDR Amendments 2025 have amended Regulation 54 to provide, that in addition to the existing reporting requirements thereunder, the issuer shall ensure that any proposed pre-IPO placements (as disclosed in the draft offer document) shall be reported to the stock exchange(s) within twenty-four hours of such pre-IPO transactions (in part or in entirety).
The corresponding amendments have been carried out in the following regulations under SEBI ICDR Regulations:
- Regulation 95 – "Reporting of transactions of the promoters and promoter group and other pre-issue transactions" for right issue: issuer shall also ensure, that any proposed pre-issue placement disclosed in the draft letter of offer shall be reported to the stock exchange(s), within twenty-four hours of such pre-issue transactions whether in part or in entirety.
- Regulation 150 – "Reporting of transactions by the promoters and promoter group and other pre-offer transactions" for further public offer: issuer shall also ensure, that any proposed pre-offer placement disclosed in the draft offer document shall be reported to the stock exchange(s), within twenty-four hours of such pre-offer transactions whether in part or in entirety.
- Regulation 209 – "Reporting of transactions by the promoters and promoter group and other pre-IPO transactions" for IPO of IDRs: issuer shall also ensure, that any proposed pre-IPO placement disclosed in the draft offer document shall be reported to the stock exchange(s), within twenty-four hours of such pre-IPO transactions whether in part or in entirety.
- Regulation 274 – "Reporting of transactions of the promoters and promoter group and other pre-IPO transactions" for IPO by small and medium enterprises: issuer shall also ensure, that any proposed pre-IPO placement disclosed in the draft offer document shall be reported to the stock exchange(s), within twenty-four hours of such pre-IPO transactions whether in part or in entirety.
Alignment of compliance officer qualifications under the SEBI ICDR Regulations with the provisions of the LODR
The SEBI ICDR Regulations require the issuer, to appoint a compliance officer responsible for monitoring compliance of securities laws, and for redressal of investors' grievances with no specified qualifications, whereas the relevant provisions under LODR, requires each listed entity to appoint a qualified company secretary as the compliance officer.
Therefore, ICDR Amendments 2025 have amended Regulation 23(8) to provide, that the issuer shall appoint a person qualified to be a company secretary as the compliance officer who shall be responsible for monitoring the compliance of the securities laws, and for redressal of the investors' grievances.
Pre-issue and price band advertisement
Prior to the ICDR Amendments 2025, under Regulation 26, the issuer shall within two days of filing the draft offer document with SEBI, make the public announcement in one English national daily newspaper with wide circulation, Hindi national daily newspaper and one regional language newspaper, at the place where the registered office of the issuer is situated, disclosing the fact of the filing of the draft offer document with SEBI and inviting the public to provide their comments to SEBI, the issuer and the lead manager with respect to the disclosures made therein.
The ICDR Amendments 2025 have amended Regulation 26 to change the number of two days to 'two working days'.
Further, prior to the ICDR Amendments 2025, it was mandatory for the issuer to make a pre-issue advertisement under Regulation 43 in one English national daily newspaper with wide circulation, Hindi national daily newspaper, and one regional language newspaper, at the place where the registered office of the issuer is situated. However, under the ICDR Amendments 2025, the issuer is now mandated to make a pre-issue and price band advertisement in the same newspapers in which the public announcement in accordance with Regulation 26 (2) of the SEBI ICDR Regulations was published.
Further, it was recommended by the Expert Committee that certain information could be replaced with a quick response (QR) code to the website of the lead managers, in order to reduce the contents of the price band advertisement. This recommendation has been incorporated under the ICDR Amendments 2025 and accordingly, the relevant Schedule X of the SEBI ICDR Regulations (which provides for the format of the pre-issue advertisement) has been amended.
Revised timeline for publishing the filing advertisement
Previously, Regulation 124 of the SEBI ICDR Regulations required the issuer to keep the draft offer document public for at least 21 days from the date of its filing. With the implementation of the ICDR Amendments 2025, the regulation now requires the draft offer document to be made public for at least 21 days from the date of publication of the public announcement on filing of the draft offer document.
Further, the erstwhile requirement of making a public announcement within 2 days of filing the draft offer document has now been amended to 2 'working' days.
Exit opportunity for dissenting shareholders
Regulation 281A has been inserted which provides a post-listing exit opportunity for dissenting shareholders. This insertion states, that in case of change in objects, or variation in the terms of contract related to objects referred to in the offer document as per the conditions, and in the manner provided in Schedule XX, the promoters or shareholders in control of an issuer shall provide an exit offer to such dissenting shareholders. Such post-listing exit offer shall not apply where there are neither any identifiable promoters nor any shareholders in control of the issuer. However, it is to be noted that the amendment is silent on the manner in which such exit is supposed to be provided to such dissenting shareholders.
Disclosure of material agreements in the offer document
As per Clause 5A, paragraph A of part A of Schedule III of LODR, it is required to disclose the agreements entered into by a company's shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employee of the listed entity or its holding, subsidiary or associate company, among themselves or with the company or with a third party, solely or jointly, which, either directly or indirectly or potentially or whose purpose and effect is to, impact the management or control of the company or impose any restriction or create any liability upon the company.
However, such agreements entered into by the company in the normal course of business, shall not be required to be disclosed unless either: (i) directly or indirectly (which includes agreements creating obligation on the parties to such agreements to ensure that a listed entity shall or shall not act in a particular manner), or potentially, or whose purpose and effect is to impact the management or control of the company, or (ii) required to be disclosed in terms of any other provisions of LODR regulations.
In this regard, in order to ensure parity with disclosures by to-be-listed companies, it was suggested by the stakeholders that material agreements, that are required to be disclosed under the LODR, are also required to be disclosed under the SEBI ICDR Regulations, and therefore the Expert Committee recommended to include disclosure of the abovementioned agreements along with the existing disclosure requirements for material agreements under the SEBI ICDR Regulations.
Thus, this disclosure has been introduced under Schedule VI of the SEBI ICDR Regulations and accordingly, the details of such agreements are now required to be disclosed in the offer documents of the issuer.
Disclosure of Standalone Information for Working Capital as an Object of the Issue
Restated financial statements are required to be disclosed in the offer document as per provisions of the SEBI ICDR Regulations, and if one of the objects of the offer is to raise capital to fund working capital requirements, certain additional disclosures are prescribed under paragraph (9)(A)(5) of Part A of Schedule VI of the SEBI ICDR Regulations which require information to be provided on a "standalone basis".
The Expert Committee recommended, that though standalone financial statements may not be required to be restated for the purpose of additional disclosures, but in case, due to the restated consolidated financials, there is an impact on the numbers disclosed in the audited standalone financial statements, then the effect of the same may be provided in the disclosures based on audited standalone financial statements.
Thus, paragraph (9)(A)(5) of Part A of Schedule VI has been amended by the ICDR Amendments 2025, to insert a new provision which states that such standalone financial statements shall be restated if there are any restatements/adjustments in the restated consolidated financial statements which may have impact on the audited standalone financial statements.
Relaxation with respect to certificate to be obtained from the statutory auditor where the object of the issue includes the repayment of a loan
The existing provisions of paragraph (9)(A)(2) of Part A of Schedule VI of the SEBI ICDR Regulations provided, that if one of the objects of the issue is loan repayment, then the details of the loan proposed to be repaid should be included in the objects of the issue and the issuer is required to obtain a certificate from its statutory auditor, certifying the utilisation of the loan for the purpose availed. Pursuant to the ICDR Amendments 2025, it is now permitted to obtain such certificate from a chartered accountant holding a valid certificate issued by the Peer Review Board of ICAI for:
- the period not audited by the current statutory auditor; or
- the loan which is proposed to be repaid was availed by a subsidiary and the current statutory auditor of the issuer is not the statutory auditor of such subsidiary.
Litigation Disclosures
The SEBI ICDR Regulations, before the amendment, required companies to disclose outstanding material civil litigation in their offer documents based on the materiality policy adopted by its board of directors. The materiality thresholds adopted by companies for disclosure in offer documents, prior to listing would vary from case-to-case. Once listed, companies are required to disclose material events, including ongoing litigation, based on the recently introduced materiality thresholds under Regulation 30 of the LODR.
As per the recommendations of the Expert Committee, the ICDR Amendments 2025 have aligned the materiality thresholds with LODR, for disclosure of civil litigations in the offer documents by amending Schedule VI, Part A, Clause 12, Sub-clause A (1) (v), to provide that the materiality threshold for disclosure of certain other pending litigations, shall be determined as under:
- the materiality policy determined by the board of directors of the issuer and disclosed in the offer documents, or
- where the value or expected impact in terms of value of such
litigation, exceeds the lower of the following:
- two percent of turnover, as per the latest annual restated consolidated financial statements of the issuer; or
- two percent of net worth, as per the latest annual restated consolidated financial statements of the issuer, except in case the arithmetic value of the net worth is negative; or
- five percent of the average of absolute value of profit or loss after tax, as per the last three annual restated consolidated financial statements of the issuer.
The ICDR Amendments 2025 also states, that all (i) criminal proceedings involving key managerial personnel and senior management of the issuer; and (ii) the actions by regulatory authorities and statutory authorities against them, shall also be disclosed in the offer documents.
Voluntary disclosure of proforma financials
Proforma financial statements for a public offering, or a rights issue, are required for the last completed financial year and interim period, where there has been a 'material' acquisition or divestment after the latest period for which financial information is disclosed, but before the date of filing of the offer document.
The proforma financial statements are required to be prepared in accordance with the guidance note issued by the Institute of Chartered Accountants of India from time to time, and certified by the statutory auditor or chartered accountant. However, the issuer may also voluntarily choose to provide proforma financial statements of acquisitions or divestments, even when they are below the materiality threshold.
The ICDR Amendments 2025 under Schedule VI, Part A Clause 11, Sub-clause I (B) (iii) provide that the issuer may voluntarily choose to provide proforma financial statements of acquisitions or divestments:
- even when such acquisitions or divestments are below the materiality threshold specified in the SEBI ICDR Regulations (e. 20% or more of the turnover, net worth or profit before tax of the latest consolidated financial statements of the company), or
- if the acquisitions or divestments have been completed prior to the latest period for which financial information is disclosed in the draft offer document or the offer document.
Additionally, the proforma financial statements may be disclosed for such financial periods as determined by the issuer, and shall be prepared in accordance with any guidance note, standard on assurance engagement or guideline issued by ICAI from time to time and certified by the statutory auditor or chartered accounts holding a valid certificate issued by the Peer Review Board of the ICAI.
The issuer may also voluntarily include financial statements of the business or subsidiary acquired or divested, provided that they are certified by the auditor (of the business or subsidiary acquired or divested) or chartered accountants, holding a valid certificate issued by the Peer Review Board of the ICAI.
Further, in case of one or more acquisitions or divestments, one combined set of proforma financials should be presented. Where the businesses acquired/divested does not represent a separate entity, general purpose financial statements may not be available for such business. In such cases, combined/carved out financial statements for such business shall be prepared in accordance with any guidance note, standard on assurance engagement, or guideline issued by ICAI from time to time.
In case of non-material acquisition/divestments, disclosure in relation to the fact of the acquisition/divestments, consideration paid/received and mode of financing, shall be certified by the statutory auditor of the issuer company or chartered accountants, holding a valid certificate issued by the Peer Review Board of the ICAI.
Our analysis
The Expert Committee was constituted to advise SEBI on reviewing the regulations from the point of view of facilitating ease of doing business, and harmonization of the provisions of the SEBI ICDR Regulations and LODR.
The Amendments mark a significant shift towards a more facilitative and transparent capital-raising environment, with far-reaching commercial implications for businesses and corporates. By aligning disclosure and compliance obligations with the LODR framework, and easing restrictions around instruments like stock appreciation rights (SARs), the amendments offer enhanced flexibility in structuring employee incentives and preparing for IPOs—particularly beneficial for startups and tech-driven companies. The expanded definition of 'capital expenditure' to include repayment of related loans, broadens the strategic use of IPO proceeds, supporting deleveraging efforts in capital-intensive sectors such as infrastructure and manufacturing. Enhanced pre-IPO and promoter transaction disclosures foster investor confidence and valuation transparency, making issuers more attractive to institutional investors. At the same time, mandatory exit offers for dissenting shareholders and litigation disclosures aligned with quantifiable thresholds promote stronger corporate governance and risk predictability. The option to voluntarily disclose proforma financials allows issuers to better communicate the strategic value of acquisitions and business combinations, enhancing market perception. Collectively, these amendments reduce regulatory friction, improve market access, and empower issuers to better manage investor expectations, while simultaneously holding them to higher standards of disclosure and accountability, thus balancing commercial agility with investor protection.
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