Both proposals are aimed at improving ease of doing business while strengthening investor protection.

I. Lock-in of Pledged Pre-Issue Shares: Closing a Structural Gap

Present challenge: Regulation 17 requires the entire pre-issue capital held by non-promoters to be locked-in for six months from the date of allotment. In practice, depositories cannot affix lock-in restrictions on pledged unlisted shares. As Initial Public Offer (IPO) timelines are compressed and shareholders are often dispersed or unresponsive, issuers and intermediaries face significant compliance obstacles.  Shares acquired by lenders pursuant to the invocation of a pledge cannot be readily subjected to a lock-in, thereby giving rise to legal uncertainty.

Proposed framework: SEBI proposes to align the treatment of pledged non-promoter shares with the framework already applicable to promoter-pledged securities. Key recommendations include:

• Mandatory amendment of the Articles of Association (AoA) before approving the IPO to deem pledged shares as locked-in for the applicable period.
• In the event of invocation or release, shares transferred to the pledgee or returned to the pledgor will continue to remain under lock-in for the balance lock-in period.
• If the lock-in cannot be applied, the depositories will mark the shares as ‘non-transferable’ on the issuer’s instructions.
• Mandatory intimation to all lenders/pledgees once the AoA is amended and subsequently at the stage of filing Draft Red Herring Prospectus (DRHP).
• Enhanced disclosures in the DRHP/Red Herring Prospectus (RHP) regarding treatment of pledged non-promoter shares during lock-in.

Practical implications:  Issuers will now be required to complete these diligence steps and amend their AOA prior to the filing. This will provide greater clarity to the lenders and ensure that pledge enforcement will remain unaffected while the issuer complies with IPO lock-in requirements. Lead managers and counsel must also ensure consistency across the DRHP, RHP and diligence reports, particularly where multiple lenders or older pledge arrangements are involved.

II. Replacing Abridged Prospectus with an Offer Document Summary

Retail investors often do not read the full offer document, and the existing abridged prospectus, although mandated to accompany application forms, has limited utility. SEBI notes that public comments on DRHPs are negligible, and many retail investors rely on unregulated secondary sources for IPO evaluation.

SEBI proposes to overhaul the retail-facing disclosure regime by amending Schedule VI of the ICDR Regulations, with the revised text set out in Annexure II of the consultation paper. The changes centre on elevating the Offer Document Summary as the primary retail disclosure and discontinuing the abridged prospectus. Key proposals include:

1. Boosting Disclosures in the Offer Document Summary: Item (4) of Part A, Schedule VI is proposed to be expanded and standardised to position the Offer Document Summary as the central retail-facing disclosure. Under the revised framework, it must be filed along with the DRHP, updated DRHP-I, RHP, and SME offer documents and separately hosted on the websites of the issuer, SEBI, the stock exchanges and the lead managers. This treatment was not previously required for the Summary and marks a structural shift in how retail disclosures are organised.
2. Removal of Abridged Prospectus: Part E of Schedule VI, which sets out the contents of the abridged prospectus, is proposed to be deleted in its entirety. In line with this change, all corresponding provisions in the ICDR Regulations that require the abridged prospectus to accompany application forms will also be removed.
3. Amendments Requiring QR Code-Based Access to Disclosures: Application forms will now include QR codes and direct links that take investors straight to the RHP, the Offer Document Summary and the price band advertisement. This digital approach removes the need for a physical abridged prospectus and makes key information easier and quicker for investors to access.
4. What’s Covered in the Offer Document Summary: The amended Item (4) of Part A, Schedule VI, as set out in Annexure II, requires the Offer Document Summary to provide a concise and standardised snapshot of all key information. It will now include an enhanced business overview, a clear industry overview, brief promoter profiles, and a summary of the objects of the issue. It must also set out the pre- and post-issue shareholding of promoters, the promoter group and other significant shareholders, together with the key financial metrics relevant for investors. In addition, the Summary will present the KPIs used for price discovery, a tabulated statement of pending litigations and the top ten internal risk factors aligned with the price band advertisement.
5. Details to be Excluded from the Offer Document Summary: Several granular items that currently appear in the Offer Document Summary, such as detailed OFS breakdowns, historical share pricing information, minor corporate actions and similar low-relevance disclosures, are proposed to be removed from Item (4) and kept only in the full offer document. This streamlining is reflected in the revised list set out in Annexure II.

Practical implications: The Offer Document Summary will require tighter cross-sectional alignment between business, industry, financials, risk factors and basis of issue price. Lead managers and counsel must ensure consistency across the summary, RHP and price band advertisement, particularly around KPIs and top-risk disclosure. Retail investors gain access to a clearer, standardised, and easily accessible resource for evaluating IPOs.

III. Impact on Market Participants

The proposed changes are likely to affect different stakeholders in distinct ways. For issuers, earlier IPO planning will be necessary due to mandatory AoA amendments, which should, in turn, reduce execution risks linked to inconsistencies in locking pledged shares and lead to a transparent retail disclosure framework. Lenders and pledgees gain greater clarity on how shares will be treated after invocation and can be assured that their right to enforce will remain protected notwithstanding the lock-in requirements. Intermediaries will have increased responsibility for drafting, verifying and cross-referencing the Offer Document Summary, along with added procedural requirements for hosting disclosures online and ensuring functional QR code access. Retail investors stand to benefit from more accessible, uniform and digitally available information, which may reduce reliance on unregulated secondary sources.

IV. Conclusion

SEBI’s proposals are targeted but significant. By resolving long-standing practical issues surrounding lock-in requirements on pledged shares and redesigning retail-facing disclosures, the regulator is steering the public issue regime toward greater clarity, efficiency and investor protection. Market participants may wish to evaluate the proposed amendments and submit comments before the consultation window closes on December 4, 2025.