SEBI Eases Initial Public Offering Norms

• 13 Sep 2025
• 291 Views

The market regular Securities and Exchange Board of India (SEBI) gave approval for sweeping changes to public offer norms, allocations for IPO, related party transactions and foreign investor access. These changes are aimed at making compliance easier and increasing market participation.

For very large issuers having more than Rs. 1 lakh crore market cap, SEBI has recommended amendments to be made to Securities Contracts (Regulation) Rules 1957 to stagger compliance with minimum public shareholding requirements. Now, such companies can list with lower public float and will be provided with extended timelines for meeting 25% minimum public shareholding norm.

If public shareholding at listing is less than 15%, it must be raised to 15% within a period of 5 years and 25% within 10 years. If it is 15% or more at listing, then the 25% threshold needs to be fulfilled within years. Similar timelines are applicable for issuers above Rs. 5 lakh cr. market cap.

SEBI has cleared changes to SEBI Issue of Capital and Disclosure Requirements Regulation 2018. It revised anchor investor norms. Now, life insurance companies as well as pension funds will be included in the reserved anchor investor portion alongside mutual fund.

The overall anchor reservation has risen from one third to 40%, with one third reserved for mutual fund and remaining for insurers and pension funds. To allow greater flexibility for large FPIs operating multiple funds, the cap on number of anchor allottees has also been relaxed.

The SEBI board has approved several amendments that are aimed at improving the ease of doing business, particularly concerning related party transaction rules under LODR. These changes introduce scale based thresholds as well as make disclosure requirements simpler. Additionally, regulator has permitted retail schemes in Int’l Financial Services Centres with Indian sponsors to register as Foreign Portfolio Investors. 

It also approved the SWAGAT FI framework, designed to facilitate access for trusted foreign investors, such as sovereign wealth funds and pension funds. These easing measures come at a time when international outflows have increased in recent months because of high US tariffs, low profitability and elevated valuations in the market. 

Furthermore, the new rules have reduced the max exit load for mutual funds from 5 percent to 3 percent. They also introduce new incentives for distributors to encourage onboarding of women investors and investors from B-30 cities.

REITs have been reclassified by the market regulator as equity instruments for mutual fund investments. This has been done for higher participation as well as possible index inclusion. Also, the market regulator lowered min investment threshold for large value funds under AIFs  from Rs. 70 cr to Rs. 25 cr while creating a new AI-only funds category with regulatory flexibility. 

A proposal was cleared by SEBI to set up local offices in key state capitals such as Jaipur, Hyderabad, Bengaluru and Lucknow among others to strengthen the outreach of investors. The new decisions by SEBI have made governance norms tighter for market infrastructure institutions and mandated two executive directors with oversight on risk and compliance.

Source: LiveMint