Securities and Exchange Board of India (Sebi) has announced enhanced disclosure standards for initial public offerings, with chairman Tuhin Kanta Pandey emphasizing stricter transparency requirements during a recent industry event. The new guidelines aim to improve the quality of IPO documentation and strengthen investor protection mechanisms.

Enhanced Disclosure Requirements

Issuers must now provide comprehensive capital structure disclosures that clearly explain past capital-raising activities, preferential allotments, and any changes in control occurring close to the IPO timeline. Pandey stressed the importance of greater business model clarity, requiring transparent presentation of revenue and cost drivers.

The management discussion and analysis sections must move beyond basic narration to provide detailed explanations of both internal and external performance drivers. This shift represents a significant enhancement in the depth of information required from IPO applicants.

Strengthened Due Diligence Standards

Sebi's inspections have revealed concerning gaps in current due diligence practices. Pandey noted that due diligence processes are not always independent and frequently rely heavily on issuer undertakings rather than independent verification.

The new requirements mandate independent verification of projections, particularly for working capital and capital expenditure estimates. Investment bankers must maintain comprehensive backup documentation for all material statements included in IPO documents.

Market Performance and Pipeline

India continues to demonstrate strong IPO market performance, maintaining its global leadership position. The country ranks first worldwide in terms of IPO numbers and third in terms of fundraising value.

Sebi's internal estimates indicate a robust fundraising pipeline, with potential for issuers to raise an additional ₹1.50 lakh crore in upcoming offerings.

Valuation Concerns and Market Dynamics

Pandey highlighted significant concerns regarding valuation mismatches between unlisted share markets and IPO book-building processes. The disparity between pricing in unlisted markets and prices discovered during formal IPO procedures represents a key regulatory challenge.

The chairman acknowledged that pre-listing and post-listing environments operate as "different worlds," with substantial numbers of unlisted companies requiring regulatory attention. Sebi plans to explore solutions in consultation with the Ministry of Corporate Affairs.

NSE Settlement Development

In a separate announcement, Pandey confirmed that Sebi has agreed in principle to the National Stock Exchange's settlement application related to the co-location case. The settlement process is currently under review by various regulatory committees.

NSE had filed two applications in June 2025 to settle the long-standing co-location and dark fiber cases, offering to pay over ₹1,300 crore. The regulator indicated it expects to issue a no-objection certificate for the NSE IPO by month-end, marking progress in resolving these regulatory matters.

The Securities and Exchange Board of India (SEBI) is examining whether it should step in to regulate the fast-growing unlisted share market, which currently operates largely outside its direct oversight, Chairman Tuhin Kanta Pandey announced on Thursday. Speaking on the sidelines of the Association of Investment Bankers of India's annual convention, Pandey revealed that the regulator is actively discussing this significant policy shift.

Regulatory Authority Assessment

SEBI is currently discussing the issue with the Ministry of Corporate Affairs to assess whether the regulator has the legal authority to oversee companies that are not listed on stock exchanges. "SEBI first needs to examine whether it has the legal authority to regulate companies that are not listed on stock exchanges and how far such regulation can extend," Pandey stated.

Valuation Concerns Drive Regulatory Interest

A key concern for the regulator is the wide divergence often seen between prices discovered in the unlisted market and valuations that emerge when companies eventually access public markets. "Prices agreed upon in private deals often do not match the prices discovered during the IPO book-building process, creating confusion and potential risks for investors," Pandey explained.

The unlisted share market comprises equity in companies that are not traded on recognised stock exchanges, with investors typically accessing these shares through private deals, employee stock option plans or intermediaries. Since these companies operate outside the listed ecosystem, they are not subject to continuous disclosure norms, often leaving investors with limited, delayed or uneven information on financial performance and business risks.

Significant Policy Shift Under Consideration

Traditionally, SEBI's regulatory role begins once a company prepares to list its shares. Any move to regulate unlisted markets would therefore mark a significant shift, especially as participation in pre-IPO and unlisted shares has risen sharply in recent years, driven by investor appetite for early-stage exposure.

Separately, regarding the National Stock Exchange's long-pending initial public offering, Pandey said SEBI is currently examining the exchange's settlement application. "In principle, we agree with the settlement," he said, adding that the proposal is being reviewed by various internal committees.

Broader Capital Market Vision

In his address to the AIBI convention, Pandey outlined SEBI's broader forward-looking agenda for capital markets, emphasising that India's next phase of growth will require patient capital for the deep-tech, biotechnology and clean energy sectors. The regulator's priority will be to improve information accessibility and investor comprehension, while intervening firmly in cases of misrepresentation or regulatory breaches.

Pandey highlighted that markets play an increasingly central role in funding economic expansion, with equity and debt mobilisation at elevated levels and a robust IPO pipeline still in place. However, he flagged persistent disclosure gaps in offer documents, particularly around risk factors, valuation rationale and use of proceeds, placing responsibility on merchant bankers to ensure rigorous, independent due diligence.