The Securities and Exchange Board of India (SEBI) has introduced significant changes to the Initial Public Offering (IPO) landscape, expanding the pool of anchor investors and increasing their overall allocation. These amendments to the ICDR (Issue of Capital and Disclosure Requirements) Regulations aim to enhance the stability and diversity of IPO subscriptions.

Expansion of Anchor Investor Pool

SEBI has now opened the doors for life insurance companies registered with the Insurance Regulatory and Development Authority of India (IRDAI) and pension funds registered with the Pension Fund Regulatory and Development Authority (PFRDA) to participate in the reserved anchor portion of IPOs. Previously, this segment was exclusively reserved for mutual funds.

Increased Reservation for Anchor Investors

The regulator has raised the overall anchor portion reservation from one-third to 40% of the total issue size. This increase is structured as follows:

• One-third of the anchor portion is earmarked for domestic mutual funds
• The remaining balance is allocated for insurance companies and pension funds

Streamlined Allocation Process

SEBI has also refined the anchor allotment process:

• Merged two existing categories into a single bucket for allocations up to Rs 250 crore
• Requires a minimum of 5 and a maximum of 15 anchor allottees
• Each allottee must receive at least Rs 5 crore worth of shares
• For every additional Rs 250 crore allocation, 15 more anchor allottees will be permitted

Reallocation Mechanism

In cases of under-subscription in the portion reserved for insurers and pension funds, SEBI has provided for reallocation of the unsubscribed shares to mutual funds.

Decision-Making Process

This regulatory change was finalized during a SEBI board meeting chaired by Chairman Tuhin Kanta Pandey.

These amendments are expected to bring more stability to IPO subscriptions and potentially increase the participation of institutional investors in the Indian primary market. By broadening the anchor investor base, SEBI aims to enhance the robustness of the IPO process and provide more opportunities for a diverse range of institutional investors.

The Securities and Exchange Board of India (SEBI) has approved significant changes to the minimum public offer requirements for Initial Public Offerings (IPOs), addressing challenges faced by large issuers in the Indian market.

Key Changes in IPO Regulations

SEBI's decision aims to modify both the minimum public offer and timeline requirements for meeting minimum public shareholding in IPOs. These changes are particularly relevant for large issuers who have been facing difficulties in diluting substantial stakes through IPOs due to market absorption capacity constraints.

Current Regulations

Under the existing rules, issuers with a post-issue market capitalization exceeding Rs 1 lakh crore are required to offer at least Rs 5,000 crore and 5% of the post-issue market capitalization to the public during their IPO.

Decision-Making Process

The modifications to the IPO regulations were approved during a SEBI board meeting chaired by Tuhin Kanta Pandey. This decision reflects SEBI's responsiveness to market dynamics and its efforts to create a more conducive environment for large-scale public offerings.

Implications for the Market

These regulatory changes are expected to:

• Provide more flexibility to large issuers in structuring their public offerings
• Potentially increase the number of big-ticket IPOs in the Indian market
• Address the market absorption capacity issues that have been a concern for substantial stake dilutions

While the specific details of the changes have not been provided in the initial announcement, market participants and potential issuers will be keenly awaiting further clarification on the revised norms.

SEBI's move underscores its commitment to evolving the regulatory framework to meet the needs of a growing and dynamic Indian capital market. As more details emerge, it will be crucial for companies planning large IPOs to carefully consider how these changes might affect their offering strategies.