Reforming SEBI Regulations for New-Age Tech Company IPOs in India

India’s Tech IPO Wave Is Here—But Are Our Regulations Still Stuck in the Past?

Let’s be honest—2024 was a landmark year for India’s markets. If you even glanced at the financial news, you saw it coming: a flood of tech IPOs, over ₹29,000 crore raised, and an investor base that couldn’t get enough of everything from fintech darlings to rising e-commerce platforms. In total, 13 high-profile new-age tech companies (NATCs) went public last year. And they didn’t just raise capital—they challenged the very framework we’ve used to define a “successful IPO” for decades.

Here’s the uncomfortable truth: India’s IPO rulebook wasn’t built for this kind of company. And now, it’s starting to show its age.

SEBI’s Framework: Strong, But Not Built for This

To be fair, SEBI—India’s capital markets regulator—has done a lot of heavy lifting over the years. Its ICDR Regulations (2018) are the most recent set of guidelines meant to keep IPOs clean and investor-friendly. They were necessary, even overdue. But here’s the catch: these rules were crafted with traditional businesses in mind. You know the type—companies with factories, machinery, and real estate on their balance sheets.

What’s Actually Changing in Tech IPOs? A Lot.

Today’s tech companies are lean, fast, and built on a completely different foundation. They run on venture capital, user data, and product velocity, not land and machinery. Their financial success isn’t defined by how many buildings they own—it’s in daily active users, platform stickiness, and ecosystem depth.

But SEBI’s rules—especially when IPO proceeds exceed ₹100 crore—can feel like trying to drive a Formula 1 car down a village road. Companies are expected to tick off detailed disclosures, submit third-party cost justifications, and comply with tight fund usage monitoring. That may be fine for legacy firms, but for tech companies operating in real-time, it slows everything down and makes innovation harder.

Where’s the Money Going? Not Where You Might Think

If you think these IPOs are all about buying real estate or clearing old debt, think again. Here’s where the proceeds are actually heading:

Tech & R&D: A significant portion is going into strengthening platforms, AI-driven features, and securing sensitive data. One top food delivery firm, for instance, channelled its funds into building a real-time logistics engine to improve delivery times.
User Growth: Customer acquisition is everything. Expect massive spends on rewards, marketing blitzes, and even strategic acquisitions. SEBI currently allows up to 35% of IPO funds to be used for “blind-pool” acquisitions—essentially giving these firms the flexibility to grab opportunities without being bogged down by pre-approval loops.
Business Diversification: Many firms are leveraging IPO capital to move into adjacent sectors. One e-commerce platform recently launched its own digital payments business, transforming itself into a financial super app.
People Power: Human capital is king. That’s why tech IPOs are often used to fund ESOP buybacks, training programmes, and initiatives aimed at retaining top-tier talent.
Digital Infrastructure: Not factories, but cloud infrastructure. High-performing apps, secure data centres, and real-time analytics require continuous investment.
Customer Loyalty & Merchant Incentives: IPO money is also being spent on referral programmes, merchant onboarding perks, and customer engagement strategies—all aimed at creating stickier platforms.

The Regulatory Disconnect: A Case for Rewriting the Playbook

To be clear, SEBI’s intentions aren’t the problem. It has protected Indian investors remarkably well. But we’re at a point where clinging to older regulatory models could end up doing more harm than good.

Let’s look at what other markets are doing:

In the US, the SEC doesn’t micromanage how companies allocate their IPO proceeds. Firms can outline broader plans without being forced into rigid categories.
The UK and Singapore are pivoting to principles-based disclosures—which focus less on formality and more on clarity, intent, and forward guidance.

Compare that to India, where SEBI still requires extensive backward-looking disclosures, cost estimates tied to historical benchmarks, and strict fund utilisation monitoring. The process becomes slow, expensive, and frankly, a little out of sync with the way NATCs actually function.

What Needs to Shift—And Why Now

If we want to keep attracting world-class listings from the Indian tech ecosystem, some recalibration is long overdue. Here’s what that could look like:

Recognising Intangibles: Regulators should formally acknowledge the value of spending IPO proceeds on R&D, software, talent acquisition, and intellectual property. But with a caveat—these investments should be clearly disclosed, and companies must explain how they’ll deliver value to investors.
Forward-Focused Justifications: Instead of forcing firms to justify spending based on past performance, we need a framework that allows them to make the case for future potential. Tech companies aren’t built in hindsight.
Simplified, Principles-Based Disclosure: Let companies tell their story in a way that’s meaningful. We don’t need less regulation—we just need smarter regulation.
Clearer Risk Disclosures: Tech IPOs come with their own breed of risk—regulatory uncertainty, platform fatigue, tech obsolescence. Companies should be encouraged to speak plainly about these, so investors aren’t buying blind.
Tech-Enabled Monitoring: Instead of old-school audits, why not move to real-time digital reporting? With the kind of tools we have today, there’s no excuse not to track fund usage more transparently and efficiently.

A Final Word

We’re at a pivotal moment. The appetite for tech IPOs is strong, investor interest is real, and India’s homegrown tech sector has never looked more promising. But if we don’t modernise our regulatory infrastructure, we could end up sending the wrong message—not just to entrepreneurs, but to the global investment community.

SEBI doesn’t need to lower the bar. It just needs to shift it.

Because if India wants to be the preferred listing destination for the next generation of tech giants, it’s going to need a regulatory model that understands how the game has changed—and why the old playbook no longer works.