Raising capital under SEBI rules: IPO, further issue, buy-back and ESOP

Which SEBI rulebook governs your capital raise, and which version is the live one?

SEBI publishes more than forty regulations, and the overwhelming majority of them bind intermediaries. Brokers, merchant bankers, portfolio managers, AIFs, custodians, rating agencies. An operating company that is listed, listing, or carrying listed debt is touched by only a handful. Four of them decide how you raise or return capital.

Equity issuance sits under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2018 (last amended March 21, 2026). Returning capital to shareholders sits under the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 (last amended July 6, 2026). Employee equity sits under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (last amended December 4, 2025). Plain non-convertible debt sits under the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (last amended January 21, 2026).

That last one carries a practical consequence people miss. A company with listed NCDs and unlisted equity never opens ICDR at all. Its issuance rules come from NCS 2021 and the Master Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper dated Oct 15, 2025; its continuous obligations come from the Master Circular for listing obligations and disclosure requirements for Non-convertible Securities, Securitized Debt Instruments and/ or Commercial Paper dated Jul 11, 2025. Applying QIP pricing or preferential-issue lock-in to such a company is a category error: there is no listed equity to price against.

Now the version trap, which is the single most expensive mistake on this subject. The operative consolidated circular for an equity raise is the Master Circular for Issue of Capital and Disclosure Requirements dated Feb 09, 2026 . That document records on its own face that a master circular for compliance with the ICDR Regulations was issued on June 21, 2023, was updated and reissued on November 11, 2024 consolidating circulars issued till September 30, 2024, and has now been updated to include all relevant circulars issued till December 31, 2025. The November 11, 2024 file of the identical title is still listed on SEBI's master-circulars page. It has been superseded and must never be cited as current. SEBI's listing carries several titles twice (the same duplication exists for research analysts, investment advisers and registrars to an issue) so the title alone does not identify the live version. Read the date.

Finally, regulations bind and master circulars operationalise, and neither displaces continuous disclosure. Every corporate action in this guide triggers an intimation, an outcome filing or a disclosure under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (last amended July 14, 2026), read with its Jan 30, 2026 master circular .

Map the intent to the instrument: Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2018 for equity issuance, Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 for returning capital, Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 for employee equity, and Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 for non-convertible debt. </>), soThat: (<> You open the correct rulebook before anyone drafts a board note, instead of retrofitting a decision to whichever regulation the advisor knows best. </>), }, , , , , , ]} conclusion= />

Does your company clear the ICDR profitability test, or must you take the 75% QIB route?

Take regulation 5 first, because those are gates and not scores. An issuer is not eligible to make an initial public offer if the issuer, any of its promoters, any promoter-group entity, any director or any selling shareholder is debarred from accessing the capital market by SEBI; if any promoter or director is a promoter or director of another company that is so debarred; if the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower; or if any promoter or director is a fugitive economic offender. Regulation 5(2) additionally bars an IPO where outstanding convertible securities or any other right entitling a person to receive equity shares exists. Carved out for outstanding employee stock options, and for stock appreciation rights fully exercised before the red herring prospectus with full disclosure of the resulting share count.

Then the three cumulative financial tests in regulation 6(1), all on a restated and consolidated basis:

• Regulation 6(1)(a). Net tangible assets of at least three crore rupees in each of the preceding three full years of twelve months each, of which not more than fifty per cent are held in monetary assets. The fifty per cent cap falls away where the issue is made entirely through an offer for sale, and excess monetary assets are cured by firm commitments to deploy them in the business or project.
• Regulation 6(1)(b). An average operating profit of at least fifteen crore rupees during the preceding three years of twelve months each, with operating profit in each of those three years.
• Regulation 6(1)(c). Net worth of at least one crore rupees in each of the preceding three full years.

Regulation 6(1)(d) is the one that catches rebranding exporters: if the issuer has changed its name within the last one year, at least fifty per cent of the revenue for the preceding one full year must have been earned from the activity indicated by the new name. A trading house that renamed itself around a manufacturing identity has to be able to show the revenue actually followed the name.

Regulation 6(2) is the fallback, and it is expensive. An issuer that does not satisfy regulation 6(1) may still make an IPO, but only through the book-building process , undertaking to allot at least seventy five per cent of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to do so. Regulation 32(2) then caps retail individual investors at not more than ten per cent and non-institutional investors at not more than fifteen per cent. So a consumer-facing exporter that expected a retail book loses it. Contrast regulation 32(1) for a 6(1)-compliant issuer: not less than thirty five per cent to retail individual investors, not less than fifteen per cent to non-institutional investors, and not more than fifty per cent to qualified institutional buyers with five per cent of that allocated to mutual funds.

Regulation 4 fixes when the conditions are tested: both as on the date of filing the draft offer document with SEBI and as on the date of filing the offer document with the Registrar of Companies. A director appointed between those two dates has to be re-run through the regulation 5 disqualifiers.

Regulation 7(1)(a) to (c) adds the general conditions: in-principle approval for listing from the stock exchanges, an agreement with a depository for dematerialisation of specified securities, and dematerialisation before filing the draft offer document of the holdings of promoters, the promoter group, selling shareholders, directors, key managerial personnel, senior management, qualified institutional buyers, employees, holders of shares with superior voting rights and entities regulated by financial sector regulators. A list widened with effect from October 8, 2025. For a family-run exporter that means chasing dormant physical holdings of relatives months before filing, not days.

Two regimes sit outside these main-board tests and are dealt with separately in ICDR: Chapter IIA, which governs pre-filing of the draft offer document, and Chapter IX, which governs issues by small and medium enterprises.

How much must the promoters put in, and how long is everyone locked in?

Regulation 14(1) sets the quantum: the promoters must hold at least twenty per cent of the post-issue capital. Where post-issue promoter shareholding would fall short, the gap may be met by alternative investment funds, foreign venture capital investors, scheduled commercial banks, public financial institutions, insurers registered with IRDAI, or (since the amendment effective May 18, 2024) any non-individual public shareholder holding at least five per cent of the post-issue capital, or any promoter-group entity other than the promoter or promoters. That contribution is subject to a maximum of ten per cent of the post-issue capital, and making it does not cause the contributor to be identified as a promoter. Minimum promoters' contribution does not apply at all where the issuer has no identifiable promoter.

Regulation 14(2)(c) covers the unusual case of an initial public offer of convertible debt instruments without a prior public issue of equity shares: the promoters must bring at least twenty per cent of the project cost in the form of equity shares, and at least twenty per cent of the issue size must come from the promoters' own funds.

Then the lock-in ladder, which is where the objects of the issue come back to bite. Under regulation 16(1)(a) , minimum promoters' contribution is locked in for eighteen months from the date of allotment in the IPO. But for three years where the majority of the issue proceeds, excluding the portion of the offer for sale, is proposed to be used for capital expenditure. The Explanation defines capital expenditure to include civil work, miscellaneous fixed assets, purchase of land, building and plant and machinery, and, since the amendment effective March 8, 2025, repayment of existing loans taken for the purpose of such capital expenditure. Under regulation 16(1)(b) , promoter holding in excess of the minimum contribution is locked in for six months, or one year on the same capex-majority variant.

Regulation 17(1) locks in the entire pre-issue capital held by persons other than the promoters for six months from the date of allotment in the IPO. There are carve-outs: shares allotted to employees under an employee stock option, employee stock purchase or stock appreciation right scheme, and shares held or transferred by an employee stock option trust, are outside this lock-in and instead follow the lock-in prescribed under the Share Based Employee Benefits and Sweat Equity Regulations, 2021. There is also a six-month lock-in for holdings of venture capital funds, Category I and Category II alternative investment funds and foreign venture capital investors.

Regulation 18 carves out securities lent to the stabilising agent under a green shoe option. Regulation 20 is the mechanics: certificates of locked-in securities carry the inscription 'non-transferable' with the lock-in period, and for dematerialised holdings the depository must record the lock-in.

Now the operating-company point, stated plainly. A manufacturer or exporter raising money to build a line, buy plant and machinery, or repay a loan taken for that plant will almost always land in the capex-majority bucket, and therefore in the three-year promoter lock-in. An asset-light or financial issuer raising for general growth typically sits at eighteen months on the same facts. The choice of objects is therefore also a choice of promoter exit horizon, and it has to be made before the draft offer document is drafted, not after it is filed.

What can you actually spend the issue proceeds on, and who monitors it afterwards?

Regulation 7(1)(e) is the provision that most often stalls a manufacturer's draft offer document. The issuer must have made firm arrangements of finance, through verifiable means, towards seventy five per cent of the stated means of finance for a specific project proposed to be funded from the issue proceeds. Excluding the amount to be raised through the proposed public issue and excluding existing identifiable internal accruals. Sanction letters and committed facilities for the balance funding have to exist before filing, not after. A company that plans to arrange term debt once the IPO is priced has the sequence backwards.

Then the caps on what the objects may say. Regulation 7(2) : the amount for general corporate purposes stated in the draft offer document and the offer document shall not exceed twenty five per cent of the amount being raised. Regulation 7(3) : general corporate purposes together with objects where the issuer has not identified an acquisition or investment target shall not exceed thirty five per cent of the amount being raised in combination, with the unidentified-target bucket alone capped at twenty five per cent. A proviso lifts both limits where the acquisition or strategic investment has been identified and specifically disclosed in the draft offer document and the offer document. So naming the target buys back the headroom.

The same twenty five per cent general-corporate-purposes cap reappears in Chapter III for rights issues and in Chapter IV for further public offers, so the discipline follows the company into every later raise rather than applying only at the IPO.

Regulation 41 is the monitoring machinery. Where the issue size excluding the offer-for-sale portion exceeds one hundred crore rupees, the issuer must arrange for the use of proceeds to be monitored by a credit rating agency registered with SEBI. The monitoring agency reports quarterly in the Schedule XI format until one hundred per cent of the proceeds have been utilised; the board of directors and the management must comment on its findings; and the issuer must publicly disseminate the report on its own website and to the stock exchanges within forty five days from the end of each quarter.

This is one of the clearest places where the rule bites differently on an operating company. The proviso to regulation 41(1) exempts an issue made by a bank, a public financial institution or an insurance company. A financial issuer of identical size escapes the quarterly monitoring, the board commentary and the forty-five-day publication that an exporter or a manufacturer of the same size cannot.

Finally the post-issue clock. Chapter 11 of the Master Circular for Issue of Capital and Disclosure Requirements dated Feb 09, 2026 sets listing of specified securities within 3 working days of issue closure (T+3, where T is the issue closing date). That timeline must be disclosed in the offer documents and made a prominent part of the pre-issue, issue-opening and issue-closing advertisements.

Once listed, should you raise more through a rights issue, a preferential allotment or a QIP?

Rights issue. Chapter III

Regulation 86(1) sets minimum subscription at ninety per cent of the offer. The proviso disapplies it where the object of the issue involves financing other than financing of capital expenditure for a project, and the promoters and the promoter group undertake to subscribe fully to their portion of the rights entitlement without renouncing it outside the promoter group or to specific investors disclosed by the issuer. Note the shape of that carve-out: a manufacturer raising rights money for a project's capital expenditure cannot use it, and therefore carries the ninety per cent subscription risk in full.

The structural change to know is that regulations 85 and 87 now defer the opening window and the subscription period to 'such period as may be specified by the Board'. The operative numbers therefore live in the master circular, not in the regulation. Chapter 2 of the Master Circular for Issue of Capital and Disclosure Requirements dated Feb 09, 2026 supplies them: a rights issue must be completed within 23 working days from the date the board of directors approves it; advance notice of the record date to the stock exchanges under LODR regulation 42(2) must be at least 3 working days excluding the date of intimation and the record date; the newspaper advertisement on completion of dispatch must be at least 2 days before issue opening; the issue is kept open for a minimum of seven days and a maximum of thirty days; rights entitlements trade on the secondary market with T+1 settlement, commencing with issue opening and closing at least three working days before issue closure; applications may be made only through ASBA; and no withdrawal is permitted after the issue closing date. Annexure I to that chapter sets the indicative T to T+20 working-day path. In-principle application T+1, in-principle approval T+3, second board meeting T+4, letter of offer filed T+5 to T+7, record date T+8, rights-entitlement credit T+9, issue opens T+14, rights-entitlement trading closes T+17, issue closes T+20.

Preferential issue. Chapter V

Regulation 161(a) fixes the relevant date for a preferential issue of equity shares at thirty days prior to the date of the shareholders' meeting. Regulation 164(1) sets the floor price for frequently traded shares: where the equity shares have been listed for 90 trading days or more as on the relevant date, not less than the higher of the 90 trading days' volume weighted average price and the 10 trading days' volume weighted average price preceding the relevant date.

Regulation 167(1) locks promoter and promoter-group allottees in for eighteen months from the date of trading approval, with not more than twenty per cent of the total capital of the issuer locked in for that eighteen months and any excess locked in for six months; unlisted convertible securities or warrants are locked in for one year from the date of allotment. Regulation 167(2) locks allottees other than promoters and promoter group in for six months. Regulation 170(1) requires allotment to be completed within fifteen days of the special resolution, and regulation 170(2) provides that where a fresh special resolution becomes necessary the relevant date shifts to the later resolution. Which resets the price.

Qualified institutions placement. Chapter VI

Regulation 172(1)(a) requires a special resolution specifying the relevant date, with allotment completed within 365 days of passing it. Regulation 172(1)(b) requires equity shares of the same class to have been listed for at least one year prior to the date of issuance of the notice convening that meeting. Which rules out a QIP in a newly listed exporter's first year outright. Regulation 176(1) sets the floor at the average of the weekly high and low of the closing prices of the equity shares of the same class quoted on the stock exchange during the two weeks preceding the relevant date, with a discount of not more than five per cent subject to approval of the shareholders. Regulation 177 caps the tenure of convertible or exchangeable eligible securities at sixty months from the date of allotment. Regulation 178 bars the allottee from selling for one year from allotment except on a recognised stock exchange. Regulation 179(2)(a) requires a minimum of ten per cent of eligible securities to be allotted to mutual funds, and regulation 179(2)(b) bars allotment to a qualified institutional buyer who is a promoter or any person related to the promoters. Deeming related any QIB with rights under a shareholders' agreement or a voting agreement, veto rights, or a right to appoint a nominee director.

The practical read for a mid-cap operating company: a rights issue preserves promoter percentage and needs no institutional appetite, but it is calendar-heavy and carries the ninety per cent minimum subscription risk. A preferential allotment is the only route that brings in a named strategic investor or fresh promoter money, but it carries the longest lock-in and the tightest allotment window. A QIP is the fastest route to money, but it demands a year of listing history and an institutional book that most mid-caps outside the index simply do not command.

How does a buy-back work, and what changed on August 1, 2026?

Two arithmetic gates in regulation 4 of the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 decide the size before anything else is discussed.

Regulation 4(i). The maximum limit of any buy-back is twenty-five per cent or less of the aggregate of paid-up capital and free reserves, based on the standalone or consolidated financial statements whichever sets out the lower amount. The Explanation applies the same twenty-five per cent to the number of equity shares bought back in a financial year, measured against the total paid-up equity share capital in that financial year.

Regulation 4(ii). After the buy-back, the ratio of the aggregate of secured and unsecured debts to the paid-up capital and free reserves must be 2:1 or less, again on the lower of standalone or consolidated, unless a higher ratio has been notified under the Companies Act, 2013.

Here is where a mid-cap operating company is straightforwardly worse off than a financial group. Regulation 4(ii)(b) permits the debt test to be run after excluding subsidiaries that are non-banking financial companies or housing finance companies regulated by the Reserve Bank of India or the National Housing Bank, provided every excluded subsidiary is within 6:1 on a standalone basis. An exporter or a manufacturer has no such carve-out. Packing credit, term loans and every rupee of working-capital debt counts in full against the 2:1 test. Which is why a cash-rich but leveraged exporter frequently cannot buy back anything close to the amount its bank balance suggests.

Approvals. Regulation 5(i)(b) requires a special resolution passed at a general meeting, except where the buy-back is ten per cent or less of the total paid-up equity capital and free reserves (again on the lower of standalone or consolidated), in which case a board resolution suffices. Regulation 5(i)(c) requires prior consent of the lenders where any covenant is breached, and the letter of offer must specifically disclose that consent. Regulation 5(i)(a) requires the buy-back to be authorised by the articles of association.

Timing. Regulation 5(ii). Every buy-back must be completed within one year of the date of the resolution. Regulation 5(v). A copy of the general-meeting resolution must be filed with SEBI and the stock exchanges within seven working days, or two working days for a board resolution under regulation 5(vii). Regulation 5(iii). A return must be filed with the Registrar of Companies and with SEBI within thirty days of the expiry of the buy-back period.

The route history, and what changed on August 1, 2026

Regulation 4(iv) permits buy-back from existing securities holders on a proportionate basis through a tender offer, or from the open market through the book-building process or through the stock exchange. The stock-exchange route was tapered under successive provisos: less than fifteen per cent of paid-up capital and free reserves till March 31, 2023; less than ten per cent till March 31, 2024; less than five per cent till March 31, 2025; and then not allowed at all with effect from April 1, 2025 till July 31, 2026 . A further proviso inserted by the Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations, 2026 with effect from August 1, 2026 restores it: from that date the open market buy-back through the stock exchange shall be less than fifteen per cent of paid-up capital and free reserves, based on both standalone and consolidated financial statements.

Two further changes take effect the same day. Regulation 4(xi) now bars any buy-back that results in a breach of the minimum public shareholding requirements prescribed under the Securities Contracts (Regulation) Rules, 1957 or specified under LODR 2015. And regulation 4(vii) has been substituted so that the gap before a fresh buy-back offer is 'such period as may be prescribed under the Companies Act, 2013' rather than the one-year period the regulation used to state on its own face. Check the Act; do not assume one year.

Other prohibitions. Regulation 4(v). No buy-back that would result in delisting. Regulation 4(vi). No buy-back through negotiated deals, spot transactions or private arrangements. Regulation 4(x). No buy-back through a subsidiary, or through an investment company or a group of investment companies, and none while a default subsists in repayment of deposits, interest, redemption of debentures or preference shares, payment of dividend, or repayment of a term loan to a bank or financial institution. With buy-back permitted once the default is remedied and three years have lapsed since it ceased. Regulation 4(ix) restricts the sources to free reserves, the securities premium account, or the proceeds of an issue of shares or other specified securities, and never the proceeds of an earlier issue of the same kind of shares or securities.

Tender offer mechanics. Chapter III

The proviso to regulation 6 reserves for small shareholders fifteen per cent of the number of securities proposed to be bought back, or the number of securities they are entitled to as per their shareholding, whichever is higher. Regulation 2(1)(n) defines a small shareholder as one holding securities of a market value of not more than two lakh rupees on the record date, computed on the closing price on the recognised stock exchange with the highest trading volume. Regulation 7(i) requires a public announcement within two working days from the declaration of the postal ballot result or the board resolution, in the prescribed newspapers. Regulation 5(via) lets the board, until one working day before the record date, raise the maximum buy-back price and reduce the number of securities, so long as the aggregate size of the buy-back is unchanged. Regulation 9(ii) requires the letter of offer with the tender form to be dispatched electronically within two working days from the record date, with physical copies on request. Regulation 9(v). The offer opens not later than four working days from the record date. Regulation 9(vi). It stays open for five working days. Regulation 9(vii). Tendering and settlement run through the stock exchange mechanism. Regulation 10(ii). Verification and payment of consideration, with return of unaccepted securities, within five working days of closure. Regulation 11. Extinguishment and physical destruction within seven working days of the expiry of the buy-back period. Escrow under regulation 8(xi) is deposited within two working days of the public announcement, at twenty-five per cent of the consideration payable where that does not exceed one hundred crore rupees, and twenty-five per cent up to one hundred crore rupees plus ten per cent thereafter above it.

Open market mechanics. Chapter IV

Regulation 15(i) requires at least seventy-five per cent of the amount earmarked in the resolution to be actually utilised, and regulation 15(ii) requires at least forty per cent to be utilised within the initial half of the specified duration. Regulation 16(i) permits the buy-back only on stock exchanges having nationwide trading terminals. Regulation 16(ii) bars buying from promoters or persons in control of the company. The sharpest practical difference from a tender offer, where promoters may participate and, under the proviso to regulation 4(iv)(a), a promoter who declares an intention not to participate is excluded from the computation of the entitlement ratio. Regulation 16(iii) permits order matching only, excluding the 'all or none' order-matching system. A separate escrow of 25 per cent of the amount earmarked applies under the open-market chapter. Throughout, the offer must be managed by a merchant banker registered under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 .

A mid-cap engineering exporter listed on the main board has paid-up equity share capital of Rs 40 crore and free reserves of Rs 360 crore, so paid-up capital plus free reserves is Rs 400 crore. Consolidated statements show the lower figure, so consolidated is the base. Aggregate secured and unsecured debt (packing credit, a term loan against the second plant, and buyer's credit) totals Rs 650 crore. The board wants to buy back Rs 90 crore through a tender offer. The company has no NBFC or housing finance subsidiary. Assume no exchange holidays other than the one noted. </> } result= >

What approvals does an ESOP, an ESOP trust or a sweat equity issue actually need?

Scope first. Regulation 1(3) applies the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 to employee stock option schemes, employee stock purchase schemes, stock appreciation rights schemes, general employee benefits schemes, retirement benefit schemes and sweat equity shares. One rulebook, six instruments.

Then the definition that disqualifies more founders than any other clause. Regulation 2(1)(i) includes a director, whether whole-time or not, including a non-executive director who is not a promoter or a member of the promoter group. But it excludes an independent director, and it excludes both an employee who is a promoter or belongs to the promoter group and a director who, by himself or through a relative or through any body corporate, directly or indirectly holds more than ten per cent of the outstanding equity shares of the company. For a family-run exporter this usually rules out the founding family entirely.

Regulation 9A is the narrow relief, and it is time-sensitive. An employee who is identified as a promoter or as part of the promoter group in the draft offer document filed for an initial public offer, and who was granted options, stock appreciation rights or other benefits under any scheme at least one year prior to the filing of that draft offer document, remains eligible to continue to hold and exercise them. The one-year clock therefore has to have been started before anyone drafts the DRHP. It cannot be created retrospectively once a listing is contemplated.

Approvals. Regulation 6(1) requires a special resolution for every scheme, with the explanatory statement carrying the content specified in Part C of Schedule I. Regulation 6(3) requires a separate resolution in the general meeting for secondary acquisition (stating the percentage), for further secondary acquisition by the trust to maintain the five per cent cap after capital expansion through a preferential allotment or a qualified institutions placement, for grants to employees of a subsidiary or a holding company, and for grants to identified employees in any one year equal to or exceeding one per cent of the issued capital excluding outstanding warrants and conversions. Regulation 7 governs variation and repricing: a special resolution disclosing the variation, its rationale and the employees who benefit, with the exception in regulation 7(2) where the variation is only to meet a regulatory requirement. Regulation 5 requires a compensation committee to administer the schemes and frame the detailed terms and conditions.

Trust mechanics. Regulation 3(9) shows shares held by an employee benefit trust as 'non-promoter and non-public' shareholding, and the Explanation confirms they do not form part of the twenty-five per cent minimum public shareholding required under the Securities Contracts (Regulation) Rules, 1957. So an ESOP trust never helps an MPS shortfall. Regulation 3(10) caps secondary acquisition in a financial year at two per cent of the paid-up equity capital as at the end of the previous financial year. Regulation 3(11) caps total secondary-acquisition holding at five per cent for Part A, Part B or Part C schemes, two per cent for Part D or Part E schemes, and five per cent for all schemes in aggregate, measured against the paid-up equity capital at the end of the financial year immediately preceding the year in which shareholder approval is obtained; Explanation 3 disapplies the ceiling where shares reach the trust by fresh issue or by gift from promoters, the promoter group or other shareholders, and Explanation 2 applies the ceiling across all trusts and all schemes at company level. Regulation 3(12) requires unappropriated inventory to be appropriated by the end of the subsequent financial year, extendable to the second subsequent financial year with the approval of the compensation committee or the nomination and remuneration committee. Regulation 3(13) requires secondary-acquired shares to be held for a minimum of six months.

Vesting and lock-in. Regulation 21(1) sets a minimum vesting period of one year for an employee stock option scheme, with service in a prior scheme adjusted against it and the requirement disapplied on death or permanent incapacity. Regulation 22(2) locks shares issued under an employee stock purchase scheme in for a minimum of one year from the date of allotment, with the same death and permanent-incapacity relief and an adjustment for lock-in already undergone in a transferor company. The corresponding provisions for a stock appreciation rights scheme impose the same one-year minimum vesting.

Sweat equity. Regulation 30 makes sweat equity available to a company whose equity shares are listed, read with section 54 of the Companies Act, 2013, for know-how, rights in the nature of intellectual property rights, or value additions. Regulation 31 caps issuance at not more than fifteen percent of the existing paid-up equity share capital in a year and at not exceeding twenty five percent of the paid-up equity share capital at any time, with a distinct regime for a company listed on the Innovators Growth Platform. Fifteen percent per financial year subject to an overall limit of fifty percent, available up to ten years from incorporation or registration. Regulation 32(2) requires an issue to employees belonging to the promoter or promoter group to be approved by a resolution passed by simple majority, with postal ballot and/or e-voting adopted and the promoters and promoter group barred from participating in that resolution. Note the counter-intuitive shape of that: it is a lower voting threshold than the special resolution needed for an ordinary scheme, but with the interested party disenfranchised. Regulation 32(3) requires a separate resolution for each issue, and regulation 32(4) makes the resolution valid for not more than twelve months. Regulation 33 prices sweat equity by the ICDR floor for a preferential issue to a person other than a qualified institutional buyer. Regulation 34(1) requires valuation of the know-how, intellectual property rights or value addition by an independent registered valuer. Substituted for 'merchant banker' with effect from January 2, 2026, with a nine-month run-off for assignments already under way. Regulation 35 sets the accounting treatment where consideration is non-cash, and regulation 36 requires a secretarial auditor's certificate to be placed before the shareholders at the general meeting held after the issue. Regulation 38(1) applies preferential-issue lock-in to sweat equity shares, and regulation 38(2) applies public-issue lock-in and the promoters' contribution computation if the company later makes a public issue.

Closing the loop back to ICDR: regulation 5(2)(a) lets outstanding employee stock options survive into an IPO; regulation 5(2)(b) requires stock appreciation rights to be fully exercised before the red herring prospectus, with disclosure of the resulting share count; and regulation 17(1)(a) and (b) exempt ESOP and ESOP-trust shares from the six-month non-promoter lock-in while subjecting them to the SBEB lock-in instead. Regulation 10 of the SBEB Regulations requires shares issued under any scheme to be listed immediately on all recognised stock exchanges where the existing shares are listed, subject to in-principle approval and to the statements in Part D and Part E.

Pre-approval compliance checklist for any equity action

Work this top to bottom before the board note circulates. Every step is cheaper to do before an approval than after one.

Before the board note

• Confirm which instrument actually governs (ICDR 2018 for equity, Buy-Back 2018 for returning capital, SBEB and Sweat Equity 2021 for employee equity, NCS 2021 if only debt is being raised) and confirm whether your equity or only your debt is listed. A debt-only issuer follows the Jul 11, 2025 NCS listing-obligations master circular and never touches Chapters III, V or VI of ICDR.
• Confirm you are reading the Feb 09, 2026 ICDR master circular and not the November 11, 2024 file of the same name still sitting on SEBI's page. Check the date on every master circular you open, and never infer an instrument's vintage from the month-year folder in its URL.
• Run the regulation 5 disqualifier check across the issuer, every promoter, every promoter-group entity, every director and every selling shareholder. And refresh it as at both the draft-offer-document date and the RoC filing date under regulation 4.
• Test regulation 6(1) on restated consolidated numbers for each of the three preceding full years, and settle the 6(1)-versus-6(2) question before the banker starts drafting, because 6(2) rewrites the entire allocation table.
• Fix the objects of the issue before forming any expectation about lock-in , since a capex-majority object moves the promoters' minimum contribution from eighteen months to three years.
• Check the 25% general-corporate-purposes cap and the 35% combined cap , verify firm arrangements for 75% of the non-issue means of finance, and appoint a SEBI-registered credit rating agency as monitoring agency if issue size excluding the offer for sale exceeds one hundred crore rupees.
• For a buy-back, compute both gates on both sets of statements (the twenty-five per cent ceiling and the post buy-back 2:1 debt ratio on standalone and consolidated, taking the lower) then decide board resolution versus special resolution against the ten per cent line, obtain lender consents where covenants bite and disclose them in the letter of offer, confirm the action cannot breach minimum public shareholding, and check the Companies Act, 2013 for the gap required since the last buy-back rather than assuming one year.
• Diarise the outer dates on one page. Fifteen days for a preferential allotment after the special resolution, 365 days for QIP allotment, 23 working days for a rights issue from board approval, one year to complete a buy-back, twelve months' validity for a sweat equity resolution, thirty days to file the buy-back return with the RoC and SEBI, and forty five days after each quarter end to publish the monitoring agency report.
• For share-based benefits, check the promoter and ten-per-cent-director exclusions , and start the regulation 9A one-year clock before granting anything to a person who may be named a promoter in a future draft offer document.
• Line up the intermediaries each route requires. Merchant banker registered under the Merchant Bankers Regulations, 1992; registrar to an issue and share transfer agent; monitoring agency; debenture trustee for a debt issue; independent registered valuer for sweat equity; secretarial auditor for the sweat equity certificate.
• File the LODR-driven intimations and outcomes alongside , since none of these regulations displaces continuous disclosure under LODR 2015 and its Jan 30, 2026 master circular. And a corporate action is also price-sensitive information for insider-trading purposes under the Prohibition of Insider Trading Regulations, 2015 .
• Open the instrument itself for anything with a number or a date attached , and re-check SEBI's page for a later amendment. ICDR, Buy-Back, SBEB and LODR were each amended within the last twelve months, and several buy-back provisions changed on August 1, 2026.

Update history

• 2026-08-14 First published.