SEBI signals willingness to examine limited oversight in ‘to-be-listed’ market

The regulator emphasised that discussions are still at an exploratory stage and that no proposal or timeline has been finalised

• SEBI may regulate grey market for upcoming IPO stocks
• Framework applies post-DRHP approval, not to all unlisted shares
• Discussions are exploratory; no proposal or timeline is set yet

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While expectations remain on track for 2026 to turn out to be another IPO-heavy year, the unregulated grey-market premiums (GMPs) continue to inflate expectations and distort price discovery for the upcoming offerings. Within this, at a recent event, the Securities Exchange Board of India chairperson Tuhin Kanta Pandey indicated willingness to examine a narrowly scoped regulatory framework specifically for the “to-be-listed” market — without extending oversight to the broader unlisted equity space.

Responding to questions during the latest PMS Conclave, held in association with NISM and APMI, the regulator clarified that any possible intervention would not extend to the broader unlisted market. Instead, it could be explored only within the “to-be-listed” space where SEBI’s statutory jurisdiction applies.

“There is a possibility of such a kind of through the exchange mechanism for to-be-listed stocks, not in the entire gamut of unlisted space but in the to-be-listed space where SEBI’s jurisdiction comes from the statute,” he said.

He indicated that such an approach, if pursued, would likely apply for a limited window, potentially after a company’s draft red herring prospectus (DRHP) is approved. However, the emphasis was on the several operational and regulatory questions that would need to be addressed before any framework is formalised.

“We will have to work out the operational requirements and then come out with suitable consultation papers,” he said.

Regulating pre-listing activity presents structural challenges, as many disclosure and compliance obligations under listing regulations come into force only after a company is listed. As a result, any move into the “to-be-listed” space would require careful calibration to avoid regulatory overreach while addressing market distortions.

The regulator emphasised that discussions are still at an exploratory stage and that no proposal or timeline has been finalised. Meaning, that any eventual step would as per the usual protocol, follow a formal consultation process with market participants.