India: A Capital Markets: Equity Overview
Introduction
Capital markets enable capital allocation, price discovery and liquidity, which allows companies to raise funds. In recent years, the Securities and Exchange Board of India (SEBI) has introduced a series of structural and institutional measures to optimise capital market processes, increase transparency, and strengthen disclosure requirements, leading to greater investment and improved governance. Digital platforms and initiatives such as the National Financial Literacy Mission have empowered individuals and made it considerably easier for retail investors to participate in initial public offerings (IPOs).
SEBI’s two principal mandates – protecting investors and promoting, developing and regulating the securities market – have driven a series of reforms, enabling meaningful disclosures, moving to a T+1 settlement cycle (ie, trades settled one day after the transaction date), establishing the Social Stock Exchange and streamlining rights issue and preferential allotment norms. In 2014, SEBI introduced Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), which are pooled investment vehicles comprising income-generating real estate and infrastructure assets respectively, with mandated distribution requirements that make them attractive for investors seeking stable, long-term returns. SEBI has progressively liberalised the regulatory framework governing these vehicles to broaden their appeal and deepen investment in India’s infrastructure and real estate sectors.
Recent Regulatory Changes
In recent years, the Indian capital markets have undergone a significant transformation, driven by a growing economy, supportive government policies and technological advancement.
SEBI has introduced several key IPO-related reforms. Companies may now file their Draft Red Herring Prospectus with SEBI on a confidential basis, allowing them to receive regulatory feedback and engage with qualified institutional buyers (QIBs) before publicly disclosing sensitive business details. This brings the Indian requirements in line with other major markets and is particularly beneficial for fast-growing companies in competitive sectors.
Other important IPO-related changes include reducing the lock-in period for investors and non-promoter shareholders from 12 months to six months, and shortening the IPO to listing timeline from T+6 to T+3 working days.
SEBI has also recently introduced industry standards governing the disclosure of key performance indicators, mandating audit committee approval and certification by statutory auditors, chartered accountants, or cost accountants, thereby enhancing transparency and comparability across issuers.
For qualified institutions placements (QIPs), SEBI rationalised disclosures by dispensing with the requirement for a dedicated management discussion and analysis, requiring only summary financials, instead of full three-year financial statements, and clarifying and rationalising disclosure requirements for board composition and material legal proceedings.
In a related and significant development, the Ministry of Finance announced the Securities Contracts (Regulation) Amendment Rules, 2026, introducing a tiered system, recalibrating minimum public offer requirements and minimum public shareholding (MPS) timelines. Companies with a post-IPO market capitalisation exceeding INR1 trillion (approximately USD11.12 billion) benefit most, with MPS compliance timelines extended to up to ten years, affording flexibility to structure IPOs around genuine capital requirements rather than prescribed percentages. These changes aim to benefit Indian affiliates of multinational corporations, and large Indian conglomerates that might have previously found these erstwhile requirements onerous.
Regarding REITs and InvITs, SEBI has progressively strengthened governance norms whilst broadening access. The minimum investment threshold for private InvITs was reduced to approximately INR2.5 million (approximately USD26,381.92), reporting requirements were simplified, and restrictions on debt refinancing eased. More recently, SEBI proposed permitting InvITs to retain stakes in special-purpose vehicles after the conclusion of the contract and allowed private InvITs to allocate up to 10% of assets to early-stage projects. SEBI also re-classified REITs as equity-related products for mutual fund investment purposes, clearing the way for index inclusion and higher investment limits. Access to both private and public debt markets has further enabled capital structure optimisation for these trusts.
The evolving regulatory framework prescribed by SEBI serves a dual purpose: protecting market integrity in the near term, whilst laying the groundwork for India's capital markets to scale in depth, breadth, and global relevance, including through ease of doing business, over the coming decade. The sectors that continue to remain in focus are energy and infrastructure, defence and aerospace, technology, real estate, healthcare and life sciences, and financial services. India’s potential to become a major driver of global growth in the years ahead is expected to remain strong.
Private Equity as a Catalyst
Private equity and venture capital (“Investor”) interest in India has evolved significantly, with IPOs becoming a preferred exit route. Buoyant public equity markets, an expanding domestic investor base, progressive SEBI reforms, and India's favourable macroeconomic trajectory have boosted Investors’ confidence that IPO exits can be executed at attractive valuations and that further favourable reforms may be coming.
Investors are increasingly viewed as anchors for governance, preparing companies for public market scrutiny through adequate independent director representation, robust internal controls, and engagement of reputed professionals for financial and legal diligence. A notable trend is the growing number of IPOs where Investors are designated as “promoters”, resulting in additional lock-in requirements, liability for offer document statements, and enhanced disclosures. This signals long-term conviction and has bolstered public market confidence in Investor-backed issuances.
A key regulatory consideration for Investor-backed IPOs is the restriction on the offer for sale (OFS) component. Where an issuer does not meet the financial eligibility criteria, shareholders holding more than 20% of the pre-IPO share capital (fully diluted) may not offer more than 50% of their shareholding, while those holding less than 20% may not offer more than 10% of the total pre-IPO share capital. These thresholds apply cumulatively to shares offered in the IPO and any pre-IPO secondary sales, requiring careful structuring to preserve maximum OFS headroom.
Investors are also increasingly using REITs and InvITs to monetise investments, typically developing and stabilising assets before listing through a trust structure, while retaining strategic control. This enables developers to deleverage balance sheets and create headroom for investments in new projects. Investors – global and domestic – have also been investing directly in these trusts as unitholders, attracted by steady returns and reliable cash flows. This convergence of Investors with listed trust structures underpinned by robust governance standards reinforces the position of REITs and InvITs as long-term vehicles for capital growth.
Looking Ahead
Reforms aimed at faster time to market, enhanced confidentiality, and greater flexibility in deal structuring have delivered clear benefits. The easing of minimum IPO size rules and extended MPS timelines reflect SEBI’s intent to facilitate ease of doing business in India and accommodate high-value offerings. The streamlined QIP framework has reinforced the depth of India's post-IPO equity capital markets.
However, added complexity accompanies these changes. Companies using the confidential filing route must manage information asymmetry carefully, particularly during “test the waters” interactions with QIBs. Similarly, companies using condensed QIP disclosures must ensure consistency between corporate presentations and offer document disclosures.
REITs and InvITs are poised to play a larger role, offering investors accessible exposure to real estate and infrastructure, raising governance standards across the listed market, and gradually attracting passive investment flows as they align with mutual fund and index frameworks.
The direction of these reforms is clearly positive and reflects a maturing regulatory framework, but the interplay between equity capital markets, Investor-backed listings, trust structures, and evolving SEBI norms, demands early and informed engagement between regulators and stakeholders.