The markets regulator Securities Exchange Board of India (SEBI) on Friday reduced the post-listing lock-in period for private equity and venture capital firms as well as promoters.
SEBI said that promoters can sell 20% of their shares within 18 months after listing, instead of the current waiting period of three years.
Pre-IPO investors will now have a lock-in period of six months instead of one year. In recent years, many private equity and venture capital firms have been investing at a pre-IPO stage.
“Private equity investors will welcome the reduction of the post-IPO lock-in period as they can get a timely exit,” said Anand Lakra, partner at J Sagar Associates.
The regulator also agreed in-principle to the proposal for shifting from the concept of promoter to ‘person in control’ or ‘controlling shareholders’ in time, according to the press statement issued on Friday evening.
“The big change is SEBI’s in-principle approval to move to a controlling shareholder test instead of the current promoter test. While the actual text of the various regulations is awaited, it would be good if SEBI also uses this opportunity to re-consider the definition of control,” Lakra added.
Currently, the concept of control is not clearly defined. Sometimes even a 10% shareholder is tagged as a promoter and is required to make additional disclosures.
SEBI said that a number of businesses and new age companies with diversified shareholding and professional management are entering the listed space that have non-family-owned shareholders or do not have a distinctly identifiable promoter group.
“The board noted that the investor landscape is now changing, with private equity and institutional investors holding significant shareholding in listed companies,” the statement from SEBI said.