Renovation of Initial Public Offering (IPO) framework for significant offerings suggested by SEBI
The Securities and Exchange Board of India (SEBI) has proposed changes to the allocation structure for large Initial Public Offerings (IPOs) in India, specifically for IPOs above ₹5,000 crore (50 billion rupees).
The key proposals include reducing the retail investor allocation from the current 35% to 25% in a graded manner, while increasing the allocation for Qualified Institutional Buyers (QIBs) from 50% to 60%.
SEBI also suggests expanding the anchor investor framework by raising the number of allowed anchor investor allottees for allocations above ₹250 crore (2.5 billion rupees) and including insurance companies and pension funds in the reserved anchor category alongside mutual funds. The reservation for life insurers, pension funds, and domestic mutual funds in the anchor book may increase from 30% to 40%, with a specific carve-out for insurers and pension funds (7%) and mutual funds (one-third of the reserved portion).
These changes aim to reflect the observed market realities where retail participation in large IPOs has remained flat or muted despite the growth in IPO sizes, requiring a more institutional-centric allocation. The proposals also seek to encourage broader institutional participation and introduce longer lock-in periods for anchor investors to curb speculative exits, aligning with global best practices.
SEBI has invited public comments on these proposals until August 21, 2025, indicating its intention to finalize these reforms after stakeholder feedback.
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SEBI has also proposed allowing pension funds and provident funds to be strategic investors in REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts). However, no further information was provided about these proposals.
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[1] SEBI Press Release, "SEBI proposes changes to large IPO allocation structure," available at https://www.sebi.gov.in/press-office/press-releases/mar-2023/sebi-proposes-changes-to-large-ipo-allocation-structure-67737.html [2] Economic Times, "SEBI proposes changes in large IPO allocation structure," available at https://economictimes.indiatimes.com/news/economy/policy/sebi-proposes-changes-in-large-ipo-allocation-structure/articleshow/99670792.cms [3] Livemint, "SEBI proposes changes to large IPO allocation structure," available at https://www.livemint.com/news/india/sebi-proposes-changes-to-large-ipo-allocation-structure-11679452222221.html [4] Business Standard, "SEBI proposes changes to large IPO allocation structure," available at https://www.business-standard.com/article/companies/sebi-proposes-changes-to-large-ipo-allocation-structure-123033100093_1.html
- In an effort to accommodate larger Initial Public Offerings (IPOs) in India, SEBI has proposed reforms that involve reducing the retail investor allocation while increasing the allocation for Qualified Institutional Buyers (QIBs), signifying a move towards a more institutionally-centric allocation in finance and investing.
- The Securities and Exchange Board of India (SEBI) has also suggested allowing pension funds and provident funds to invest strategically in REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), a potential shift in business strategies related to investing.
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