CONTEXT

• India aims to attract start-ups back from foreign jurisdictions by easing capital market access.

• SEBI’s new regulatory reforms boost domestic IPOs, promote investor trust, and support “reverse flipping”.
• Increasing interest in Indian markets due to stable economy, large consumer base, and evolving startup ecosystem.

CONCEPT  

Flipping:

• Transferring ownership and IP of an Indian start-up to a foreign entity (e.g., in US, Singapore, UAE).
• Benefits: easier foreign capital access, IP protection, better valuations, and tax advantages abroad.

Reverse Flipping:

• Process of shifting foreign-incorporated start-ups back to India.
• Aimed at listing on Indian stock exchanges and tapping domestic investors.
• Common structures: Inbound Merger, Share Swap Arrangement.
• Driven by India’s economic strength, investor confidence, and policy support.

CURRENT – SEBI Reforms (June 2025)

For Startups & IPOs:

• Promoters can retain ESOPs granted 1 year prior to filing DRHP.
• Removed restriction on participating in Offer for Sale for investors holding Compulsorily Convertible Securities (CCS).
• Foreign/AIF/public institution-held shares now count toward minimum promoter contribution.

For Investors:

• New FPI category for those investing only in government securities (G-secs) with simpler KYC norms.
• Longer timelines and reduced granular disclosures for such FPIs.
• Simplified disclosure norms for portfolio managers.

For Public Sector Undertakings (PSUs):

• Relaxed delisting norms for PSUs where government holds over 90% (except banks, NBFCs, insurers).

For Capital Market Participants:

• Merchant bankers, custodians, trustees not required to separate non-core regulated activities.
• Must disclose unregulated activities (e.g., in unlisted markets) to clients.

Settlement & Governance:

• Settlement schemes for NSEL scam-affected brokers and venture capital funds.
• Demat mandate for key management holding shares before DRHP.
• Unbundling charges of clearing corporations under review; transparency mandated.

Other Eased Norms:

• Liberalised rules for REITs, InvITs, social stock exchanges, and angel funds.
• Co-investment vehicles allowed for Category-I and II AIFs.