Soon-to-list firms find a workaround to governance rules

Hello,

This week, Carlyle group was reportedly in talks to buy a majority stake in Nido Home Finance, a PE control buyout in realty and home lending, after a period of caution.

Meanwhile, CarTrade’s $1.2-billion CarDekho acquisition talks failed, a story which may be just as instructive as closed transactions for the M&A community. The problem? A valuation mismatch between public and private markets.

And in another eye-catching moment: ‘We did not sign up for chaos’ is the headline quote as the Omnicom–IPG merger sparked client jitters.

I hope you enjoy this week’s roundup – please connect on LinkedIn to discuss how Ideals VDR can help with your next M&A deal.

Let’s dive in.

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Market Trends

Is India’s IPO class too cool for school?

This year the government changed MSP (minimum public shareholding) rules, covered in a previous Teaser, which loosened capital concentration but like much else, markets and clever accountancy found a new workaround. Here’s how.

A recent Economic Times piece cited a Longhouse study of 34 venture-backed firms that have gone public since 2021 showed that nearly 90% of independent directors (ID) were appointed by them within six months of filing IPO papers. 

The new kids seem too cool for succession planning, and have been caught making last-minute board makeovers intended to meet regulatory thresholds and polish governance optics just before listing. This is worrying.

The profile of directors says a lot. Just over a third (34%) were regulatory or financial specialists; 28% were general business and strategy advisors; and 23% were nominee directors representing investors. Only 6% were sector specialists drawn from the company’s own industry.

The focus is on gaining governance credibility rather than operational guidance or long-term mentorship.

These do not present as organic or evolutionary strategy/domain-wise. It is like teenagers scrambling to tidy up their bedrooms before authority figures show up (read: compliance-driven risk controls inserted at the eleventh hour).

Hired hands

National Stock Exchange (NSE) data on director age provides the broader backdrop. The average director age is 56, with almost half (49%) clustered between 46 and 69 years old, and more than 1,400 individuals above 70 still occupying independent seats. 

What’s missing? Younger, execution-oriented independent directors.

US consultancy, Russell Reynolds’ study Deciphering the Indian Boardroom 2024 takes a different compass bearing. 

It finds that an average of 9.8 directors occupy boards across the Top 200 NSE-listed companies, with most directors holding around 2.1 seats across different boards, pointing to a tightly recycled pool of talent rather than renewal.

Leadership structure tells the deeper story. Only 21% of major Indian corporates have independent board chairs, compared with 85% in the UK’s FTSE 100 and about 25% in the S&P 100. Control still remains disproportionately concentrated with founders and promoter families. 

All this goes some way to explain the tenure mismatch as well. Parachuted leaders are entering boards late, largely for IPO legitimacy, with little commitment toward building pre-listing mentorship relationships with founders. Their mandates skew toward monitoring, audit sign-off, and risk mitigation, not long-term strategy or CEO development.

Women have little meaningful participation in this onward journey, as boards remain male-dominated, with only 21% of female directors, the RR data reveals.

It’s control, not economics, stupid

Then there’s the chief executive churn adding to the instability. According to ET, 141 CEOs left listed Indian companies in FY25, the highest figure in recent years.

Meanwhile, Deloitte’s 2025 Executive Performance & Rewards Survey, cited by Mint, finds that the pay divide widened sharply between CEOs, C-suite leadership, and independent directors.

IDs at Nifty50 firms are paid nearly double of what they were five years ago, reaching close to ₹1 crore ($120,000) annually in many cases, but without a proportional increase in firms’ governance authority.

Besides, independent chairs remain rare, promoters retain veto power, and founders continue to dominate board agendas, whether in family-run enterprises or founder-led tech companies, it is the same control architecture playing out.

Reasons for leaving

Russell Reynolds’ list of the commonly stated reasons for board and executive resignations seems euphemistic:

• Pre-occupation
• Personal reasons
• Health or old age (not retirement — directors routinely serve well beyond 60–65 in India)
• Moves to join other boards
• Structural or regulatory transitions, including resolution plans or management changes

Off the record, however, the friction points are better understood as limited autonomy, promoter resistance to modern governance norms, slow reform cycles, and insufficient board mentorship.

While Sebi has encouragingly chipped away at family-run businesses to lower their guard, the newest tech cohort is hardly at its best behaviour. IPO-led director inflation often masks promoter/founder dominance, a scramble to tidy up governance just in time for listing.

Boards may look global on paper, but that illusion cannot stretch far and managements must change if they know what’s best for them, or seasoned India investors will move on, and regulators move in to make more rules, increasing compliance costs and bringing more headaches.