Remember when Paytm, Zomato, and Swiggy went public without any “promoters”? Those days are over. India’s stock market regulator SEBI has quietly but firmly changed the rules, and now startup founders are embracing a tag they once avoided at all costs. Let’s break down what’s happening and why it matters to you as an investor.
The Big Shift: From "No Promoters" to "Proud Promoters"
If you’ve been following recent IPOs, you might have noticed something interesting. Lenskart’s CEO, Peyush Bansal, recently announced that he and his co-founders are officially “promoters” in their upcoming ₹7,278 crore IPO. Urban Company, Ather Energy, and Bluestone made similar moves this year.
This is a complete U-turn from what we saw just three years ago. Back in 2021-2022, tech giants like Paytm, Zomato, Swiggy, Ixigo, and Delhivery all listed as “professionally managed” companies—fancy speak for “no specific promoters.”
So what changed? And more importantly, what does this mean for your investments?
Why Did Founders Hate Being Called "Promoters"?
Think of the promoter tag like being the captain of a ship. You get the title, but you also get all the responsibility when things go wrong. Here’s why startup founders used to run away from this label:
The Lock-In Trap: Earlier, promoters had to keep at least 20% of their shares locked for three years after the IPO. For startup founders who’d already given away most of their ownership to investors, this was nearly impossible to meet.
The ESOP Problem: Here’s where it gets tricky. Many founders own less than 10% of their companies after multiple funding rounds. They rely on Employee Stock Options (ESOPs) to stay motivated. But SEBI’s old rules said promoters couldn’t hold ESOPs. So founders faced a tough choice: become a promoter and lose their ESOPs, or stay a regular shareholder and avoid accountability.
The Paper Wealth Issue: Vijay Shekhar Sharma owned just 9.1% of Paytm during its IPO. Deepinder Goyal? Only 4.7% of Zomato. With such small stakes, founders couldn’t meet the 20% promoter requirement even if they wanted to.
Why Did SEBI Make These Changes?
SEBI didn’t just update the rules for the sake of it. The main goal behind these new promoter requirements is to make sure someone is always clearly responsible for what happens at a company after an IPO. Earlier, when founders skipped the promoter tag, no individual was legally on the hook if things went wrong, which worried retail and institutional investors. With these new rules, SEBI wants founders to prove they have “skin in the game” and are truly committed to the long term. This builds trust, protects investors, and helps avoid confusion during any crisis. In short, the new system gives everyone more confidence that the company’s leaders will stay accountable and play by the rules.
Why Investors Didn't Like "Promoter-Less" Companies
Indian investors are used to seeing strong promoters. Reliance has the Ambanis holding over 50%. TCS has Tata Sons with 71%. These promoters have serious “skin in the game.”
When startup founders avoided the promoter tag, it raised red flags. If the person running the company won’t take legal responsibility as an owner, why should you trust them with your money?
The accountability question became crucial: Were these founders just looking to cash out through the IPO? Or were they committed for the long haul?
The Paytm Wake-Up Call
Paytm’s IPO in November 2021 exposed the problem perfectly. Vijay Shekhar Sharma avoided the promoter tag but accepted 21 million ESOPs as a “public shareholder.”
SEBI wasn’t happy. After years of scrutiny, in May 2025, Paytm had to cancel all those ESOPs. Sharma was banned from accepting fresh ESOPs from any listed company for three years.
This case sent a clear message: SEBI wanted founders to step up and own their responsibilities.
How SEBI Made the Promoter Tag Attractive
Instead of forcing founders,
SEBI smartly removed the pain points that made them avoid the promoter label:
Shorter Lock-Ins: The mandatory lock-in period dropped from 3 years to just 18 months. Suddenly, becoming a promoter didn’t mean your wealth was frozen forever.
ESOPs Allowed: In June 2025, SEBI announced a game-changer. Founders can now keep their ESOPs if they were granted at least one year before becoming promoters. Problem solved.
Flexible Ownership Rules: SEBI introduced the “person in control” concept. If you’re the CEO holding around 10% individually (or 20% with other founders), you should be the promoter—regardless of complex funding structures.
More Contributors for the 20% Rule: SEBI now allows certain investors to contribute toward the 20% minimum without becoming promoters themselves, giving founders more breathing room.
Real Examples: The New Promoter-Led IPOs
Lenskart (Opens October 31, 2025): Peyush Bansal and his co-founders proudly took the promoter tag. They collectively hold about 20% of the company. The ₹7,278 crore IPO has already attracted big names—Radhakishan Damani invested ₹90 crore, and SBI Mutual Fund put in ₹100 crore.
Urban Company (Listed September 2025): The three co-founders became promoters and didn’t sell a single share in the IPO. Their commitment paid off—the stock listed at a 57.5% premium, and the IPO was oversubscribed 103 times!
Ather Energy: The electric scooter maker’s founders, along with Hero MotoCorp, hold 51.8% as promoters. That’s serious commitment.
Bluestone: Founder Gaurav Singh Kushwaha maintained a 17% stake as a promoter in the jewellery company’s ₹1,540 crore IPO.
What This Means for You as an Investor
This shift is actually good news for retail investors like you. Here’s why:
Clear Accountability: You now know exactly who’s responsible if something goes wrong. No more hiding behind “professionally managed” labels.
Long-Term Commitment: With an 18-month lock-in, founders can’t just cash out and disappear after the IPO. Their interests are aligned with yours.
Better Governance: Promoters face stricter disclosure rules, regular compliance checks, and serious scrutiny on related-party transactions. This protects your investment.
Global Standards: India’s startup IPOs now follow better corporate governance standards, making them more attractive to foreign investors, too.
The Bottom Line
SEBI has successfully engineered a cultural shift in how startup founders approach IPOs. By removing unfair restrictions and clarifying rules, the regulator made the promoter tag desirable rather than dreadful.
For investors, this means better protection and clearer accountability. For founders, it means they can now demonstrate long-term commitment without sacrificing their hard-earned ESOPs.
The next time you see a startup IPO, check the promoter section in the prospectus. If the founders have taken that tag, it’s a positive sign they’re in it for the long haul—not just for a quick payday.
As Lenskart prepares to list and Urban Company continues its journey as a listed company, we’re witnessing a new era of responsible startup governance in India. And that’s something worth investing in.
FAQs
A promoter is a person or entity that exercises control over a company’s affairs, either directly or indirectly. As per SEBI’s definition, a promoter can appoint the majority of directors or is named as the promoter in the company’s offer document.For startups, founders with significant shareholding (around 10% or more) and who actively manage the company as CEO are usually classified as promoters.
These companies are listed as professionally managed entities, meaning they had no officially designated promoters.Founders like Vijay Shekhar Sharma (Paytm) with only 9.1% stake and Deepinder Goyal (Zomato) with 4.7% stake fell below SEBI’s promoter threshold. This structure allowed them to receive large ESOP grants, enjoy shorter lock-in periods, and maintain higher liquidity. However, after SEBI’s scrutiny of Paytm in May 2025, the regulator began tightening norms around such structures.
SEBI mandates that promoters must collectively hold at least 20% of the company’s post-IPO capital. If a founder’s stake is less than 20%, the shortfall can be covered by eligible institutional investors (like AIFs or insurance companies) without them being treated as promoters. This rule ensures founders retain enough stake, often called having “skin in the game.”
After an IPO, promoters must hold their shares for a minimum lock-in period:
- 20% Minimum Promoter Contribution (MPC): Locked in for 18 months (reduced from 3 years in 2022)
- Promoter shareholding beyond 20%: Locked in for 6 months (reduced from 1 year)
- Non-promoter shareholders: Locked in for 6 months
These relaxed timelines have made the promoter tag more founder-friendly and attractive.
Earlier, SEBI rules barred promoters from holding ESOPs, which discouraged many founders from adopting the promoter tag. In June 2025, SEBI revised the rule, allowing promoters to retain ESOPs granted at least one year before they are formally recognized as promoters. This update enables founders to keep their long-term incentive shares without losing their promoter status.
Founders of these companies are now embracing the promoter tag after SEBI’s recent reforms made it more flexible. Reduced lock-in periods, clarity on ESOPs, and a stronger focus on “control and accountability” have made the status more appealing. For example, Urban Company’s founders didn’t sell any shares during their IPO — signaling long-term commitment and confidence.
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