SEBI's Agenda for June 18 Meeting: ESOPs for Founders & PSU Delisting

India's capital markets regulator, the Securities and Exchange Board of India (SEBI), is holding a crucial board meeting on June 18. They will discuss important proposals, including new rules for employee stock options (ESOPs) for startup founders. 

Another key item on the agenda is a mechanism for the voluntary delisting of public sector companies (PSUs). These discussions aim to adapt regulations to the evolving market. 

SEBI To Consider ESOPs for Startup Founders 

Current SEBI rules classify founders as promoters during an IPO, which prevents them from being issued ESOPs. However, many new-age company founders receive ESOPs instead of cash salaries early on. This helps align their interests with shareholders. 

The proposed changes would allow founders, even if categorised as promoters, to exercise their vested and unvested ESOPs. This move aims to recognise their "skin in the game" and contribution. 

Some concerns exist that ESOPs could dilute public shareholding or be misused. SEBI is also considering a one-year cooling-off period between the grant of ESOPs and an IPO to prevent potential misuse. 

SEBI To Think Over Voluntary Delisting of PSUs 

Another significant proposal is to permit PSUs to delist voluntarily. This would apply specifically to those where the government holds more than a 90% stake. 

The regulator notes that some PSUs have very few public shares available and show weak financial health. Even profitable ones might lack long-term prospects due to outdated businesses or government decisions. 

While government ownership often offers perceived security to investors, it can inflate market prices beyond their true value. Delisting these companies often requires considering a 60-day average market price, which could lead to a higher cost for the government to buy back shares. 

Read more: Upcoming IPOs This Week (June 16-20): 2 Mainboard IPO Debuts to Watch

Conclusion 

These upcoming discussions highlight SEBI's ongoing efforts to update regulations for the changing market. Changes to ESOP rules could significantly benefit startups and their founders by providing better incentives. 

Similarly, a clear mechanism for PSU delisting could address issues related to valuation and market float for certain government-owned entities. The outcomes of this important meeting will be closely watched by both investors and companies. 
 
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