SEBI has proposed major changes in the rules related to IPO. It aims to increase the ease of doing business and encourage the participation of long-term investors. In an advisory letter issued on Thursday, SEBI said that it is proposed to reduce the reserved share for retail investors for large IPOs and increase the quota for qualified institutional buyers (QIBs).
The regulator said that the average size of IPOs above ₹ 1,000 crore has been around ₹ 4,000 crore in calendar year 2024, and it is expected to increase further in 2025 and 2026. This trend reflects the maturity and growing confidence of Indian capital markets. SEBI has sought suggestions from the public for these changes by 21 August 2025.
Retail share will decrease in large IPOs
According to the current rules, at least 35% of the share in large IPOs above ₹ 5,000 crore is reserved for retail investors. SEBI has proposed to reduce it to a minimum of 25%.
SEBI said, "The size of retail stake in large IPOs increases a lot, making full subscription difficult, especially when the market is sluggish. In such cases, overflow from retail to QIB category is allowed, but under-subscription hurts the sentiment of the IPO."
Along with this, it is proposed to increase the QIB quota from 50% to 60%, so that there is stability in demand and companies get confidence in the volatile market.
Mutual funds will get more shares
It is also proposed to increase the quota reserved for mutual funds in the QIB category. Currently, it is 5%, which has been recommended to be increased to 15%. SEBI believes that the direct participation of retail investors has remained almost stable in the last three years, while their participation through mutual funds has increased steadily.
The number of anchor investors will increase.
This change will benefit large foreign portfolio investors (FPIs) who have multiple funds and face problems due to the current line caps.
Insurance companies and pension funds will also be included
SEBI has suggested that life insurance companies and pension funds should also be included in the anchor investor category. Currently, there is only 33% reservation for mutual funds in this category. It is proposed to increase it to 40%, which will strengthen the base of long-term investors.
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