Pre-IPO startups seek Sebi nod for flexibility on Esops to founders

Pre-initial public offering (IPO) startups, where founder holdings have slipped to low levels, have sought flexibility from market regulator Securities and Exchange Board of India (Sebi) in issuing employee stock options (Esops) to them.

- KHUSHBOO TIWARI

A fintech startup planning an IPO had written to Sebi in April, seeking relaxation in issuance of Esops to founders, especially post listing, said people aware of the development.

At present, Sebi norms do not allow issuance of Esops to promoters of a company.

However, the regulator recently proposed relaxation under which founders, identified as promoters or part of the promoter group, may hold or exercise Esop benefits granted one year before the company's decision to undertake an IPO.

There are certain exemptions for startups on Esops while they are unlisted. In most cases, the founders are categorized as 'promoters' before filing of the draft documents for IPO, considering their control and rights in the company.