SEBI Eyes Transparency

26 August 2025

The Impending Regulation of India's Pre-IPO Grey Market

The murmurs from regulatory corridors have crystallised into a clear signal: the Securities and Exchange Board of India (SEBI) is set to bring the informal pre-IPO grey market under its watchful eye. 

India’s capital markets may be on the brink of a structural shift. At a time when the IPO pipeline is booming with nearly ₹4.3 trillion raised in FY25 and another ₹1.4 trillion expected soon. SEBI chairperson Tuhin Kanta Pandey has hinted at the establishment of a regulated platform for pre-IPO share trading. The idea, floated at a recent capital markets conference, is to bring order and transparency to a space currently dominated by the grey market.

The timing of this move is crucial. India’s IPO market is expanding at record speed. In 2024 alone, 337 companies tapped the public markets, 91 on the mainboard and 241 on SME exchanges, raising nearly ₹1.67 lakh crore, with average listing gains of 29%. Yet, on the unlisted side, the scale is even larger. Estimates suggest more than 1,300 profitable unlisted companies together represent nearly ₹150 lakh crore of enterprise value waiting to be unlocked.

In order to bring pre-listing transactions into a structured ecosystem that allows accredited investors, early backers, and ESOP holders to access liquidity in a safe environment.

Currently, early-stage investors and employees often wait years for IPO exits, with ESOPs going underutilized. A regulated venue could change that, allowing accredited investors to buy and sell stakes ahead of listing, with proper settlement systems, tax compliance, and checks to avoid manipulation. It also ensures that the government captures its share of revenues, while companies benefit from cleaner valuation benchmarks.

This move signifies a pivotal shift towards greater transparency and investor protection in India's burgeoning capital markets.