INDIA Law and Practice Contributed by: Raj Ramachandran, Varun Sriram, Krutamana Pisipati, Aadhitya Logeshen and Abheejit V, JSA
Companies Act, 2013, also allows the establishment of a one-person company structure. 2.3 Early-Stage Financing The Department for Promotion of Industry and Internal Trade continues to offer financing through the Start- up India Seed Fund Scheme (“SISFS”) with an outlay of INR9.45 billion (approximately USD111.84 million). According to Indian government figures, the scheme will support an estimated 3,600 entrepreneurs through 300 incubators over the next four years. The SISFS will be disbursed to eligible start-ups through eligible incubators across India. For government funding, an online call for applications is often posted, pursuant to which start-ups are short- listed. Upon selection, certain government-prescribed guidelines must be complied with, including the utili- sation of funds as per those guidelines. Along with central government schemes, certain state governments have also offered funding to early-stage start-ups, such as the Karnataka Government’s Ele- vate 2025, which provides a one-time grant-in-aid of up to INR50 Lakhs (approximately USD56,360). Elevate was launched by the Department of Elec- tronics, IT, Biotechnology and Science & Technology, Government of Karnataka, to identify and nurture the most innovative start-ups and to provide them the necessary boost at various stages through funding or mentoring. Venture capital firms, angel investors, family offices and high-net-worth individuals provide early-stage financing to start-ups. Documentation for these investments is quite formal and fairly standard, though it is more detailed and nuanced for venture capital financing rounds. Early-stage investments take the form of convertible or SAFE notes, which progress to equity and, optionally or compulsorily, to convertible instruments. 2.4 Venture Capital There are numerous local venture capital firms and investment firms associated with high-net-worth indi- viduals and family offices that provide venture capital, which are easily available to start-ups. Funding from foreign venture capital firms is also a common source
for start-ups in India, beyond angel funding and family and friends rounds. 2.5 Venture Capital Documentation Documents pertaining to venture capital investments have become quite standardised over the years. 2.6 Change of Corporate Form or Migration Start-ups are often incorporated as private compa- nies. To give effect to exit mechanisms where the pro- posal is to list on an exchange, these private limited companies convert into public companies. In terms of jurisdiction, companies tend to domicile or redomicile in a jurisdiction based on the key target and operating markets, access to funds, business valua- tions, and opportunities to list, as discussed in 2.1 Establishing a New Company . 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale According to various reports, the Indian IPO market remained resilient in the 2025-26 financial year amid global economic volatility and shifting investor senti- ment. However, in relation to tech start-ups, listings have been fewer, which in the first half of 2025 only included Ather and Arisinfra. However, several com- panies have recently received approvals for their initial public offers from the Securities and Exchange Board of India, including Shadowfax and CureFoods, with Sterlite Electric also advancing its listing plan. Notably, eyewear retailer Lenskart has recently listed on the stock exchanges. The Ministry of Corporate Affairs (MCA) has recently required most companies to dematerialise their secu- rities. Accordingly, the Securities and Exchange Board of India (SEBI) has mandated all pre-IPO shareholders to dematerialise their securities before filing the draft red herring prospectus with the authorities. Recently, National Securities Depository Limited (NSDL) has issued a circular stating that any transfer of demateri- alised shares would require the consent/ confirmation letter from the company.
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