With ease of doing business and smoother investment flow in focus, the Securities and Exchange Board of India (Sebi) on Friday cleared a slew of significant reforms comprising IPO regulations, foreign investments, and strengthening governance across market segments.
This was the third board meeting chaired by Sebi chief, Tuhin Kanta Pandey, since his appointment on March 1, 2025.
Among the proposals approved included relaxing the minimum IPO requirements for very large companies, and also extending the timeline for them to meet minimum public shareholding norms. The markets regulator also introduced a proposal that makes it easier for low-risk foreign investors to participate in the Indian securities market with the introduction of a single window access.
To enhance the country's attractiveness as an investment destination and encourage compliance, it has been decided to overhaul the governance framework of market infrastructure institutions including stock exchanges by mandating the appointment of two executive directors (EDs) to bolster operational oversight.
Also Read: New Sebi measures raise min size order, simplify MF regulations
IPO rules' relaxation
The stock market regulator has decided to relax initial public offering (IPO) rules for very large companies and also extend the timeline by up to 10 years for them to meet minimum public shareholding norms.
The move is expected to benefit mega IPOs including that of Reliance Jio Infocomm and the National Stock Exchange (NSE).
Under the new framework, companies with a market capitalisation between ₹50,000 crore and ₹1 lakh crore would be required to float 8 per cent of their equity instead of the current 10 per cent.
They would also get a timeline of five years instead of the present three years for achieving minimum public shareholding (MPS) requirement of 25 per cent.
For companies with a market capitalisation above ₹1 lakh crore, mandatory offer requirements would be reduced to 2.75 per cent from the current 5 per cent, while those above ₹5 lakh crore would need to dilute only 2.5 per cent.
Such large companies would also be given up to 10 years to achieve the 25 per cent minimum public shareholding requirement, compared with five years at present.
Since companies can now list with smaller IPOs initially while gradually increasing their public shareholding over a longer period, the immediate burden of large-scale equity dilution has been reduced which will help those who struggle with the market’s absorption of a large supply of shares when diluting substantial stakes through an IPO.
The regulator also noted that for large-sized companies, the revised minimum public offer will still be large enough to provide sufficient stock to the market, including retail investors, and facilitate liquidity.
"Regular dilution post listing impacts issuers until MPS requirements are complied with, may lead to price overhang due to the impending equity dilution, thereby adversely affecting the interest of existing public shareholders," said Pandey.
Pandey said under the proposed MPO (minimum public offer) requirements, issuers are recommended to be permitted to list with a lower initial public float, hence, an extended period is required to allow them to achieve MPS of 25 per cent in a gradual manner.
Also Read: SEBI chief signals plan for regulated platform for pre-IPO firms
Anchor investors for IPOs increased
To broaden the participation of long-term institutional investors in the IPOs, Sebi has decided to increase the number of anchor investors permitted for IPOs with an anchor portion exceeding ₹250 crore, by increasing the existing limit from 10 to 15 per ₹250 crore.
"The number of permissible anchor investor allottees for allocations above ₹250 crore has been increased. Thus, a minimum of 5 and a maximum of 15 investors shall be allowed for allocations up to ₹250 crore. For every additional ₹250 crore or part thereof, an additional 15 investors are to be permitted, subject to a minimum allotment of ₹5 crore per investor," the Sebi chief said.
Additionally, Sebi has approved a proposal to merge Category I and II for anchor allocation sizing in a bid to align the framework more effectively with the scale of the current IPO.
The total reservation in the anchor portion has also been increased from 33 to 40 per cent, of which one-third will continue to be reserved for domestic mutual funds, while the remaining will be reserved for life insurance companies and pension funds.
However, if the 7 per cent reserved for insurers and pension funds remains unsubscribed, it will be reallocated to mutual funds.
With an aim to broaden anchor investor participation, the amendments have made participation for large FPIs easier, thus enabling more diversified anchor books and aligning with global best practices.
"In addition, it will provide structured and consistent participation opportunities to long-term institutional investors such as life insurers and pension funds, thereby enhancing credibility, stability, and quality of the anchor book," Sebi said.
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