The Securities and Exchange Board of India (SEBI), through Notification No. SEBI/LAD-NRO/GN/2025/271, has introduced the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2025. Exercising its powers under Section 30 of the SEBI Act, 1992, the market regulator continues to refine and modernize the framework governing capital raising and disclosure requirements.
This latest amendment, which will come into effect 30 days from its publication in the Official Gazette, introduces key changes to Schedule XIII, Part A, Paragraph (10) of the SEBI (ICDR) Regulations, 2018—particularly concerning anchor investors and allocation norms in public issues.
1. Enhancing Flexibility in Anchor Investor Allocation
Anchor investors play a crucial role in building confidence and stability in the Initial Public Offering (IPO) process. They are institutional investors invited to subscribe to a portion of shares before the issue opens to the public, helping establish a benchmark for pricing and demand.
The amendment updates the structure of anchor investor participation as follows:
- For issues with an allocation up to ₹250 crore, a minimum of 2 and a maximum of 15 investors are permitted, with each investor receiving a minimum allotment of ₹5 crore.
- For issues above ₹250 crore, a minimum of 5 and maximum of 15 investors may participate for the first ₹250 crore. Additionally, 15 more investors may be added for every additional ₹250 crore (or part thereof), maintaining the minimum ₹5 crore allotment per investor.
Implication:
This tiered structure increases participation flexibility and ensures diversification among institutional investors, reducing concentration risk. It also widens the anchor investor base for larger IPOs, improving market depth and price stability.
2. Reserved Allocation for Domestic Mutual Funds, Life Insurers, and Pension Funds
SEBI has also overhauled sub-paragraph (d) to strengthen participation by long-term domestic institutional investors (DIIs), who contribute significantly to market resilience.
Under the revised regulation:
- 40% of the anchor investor portion will be reserved within the limits defined in sub-paragraph (b).
- 33.33% of this portion is reserved for domestic mutual funds.
- 6.67% is reserved for life insurance companies and pension funds.
- In case of under-subscription in the insurance or pension fund category, the remaining shares may be reallocated to domestic mutual funds.
Explanation:
- A “life insurance company” refers to an entity registered with the Insurance Regulatory and Development Authority of India (IRDAI).
- A “pension fund” refers to a fund registered with the Pension Fund Regulatory and Development Authority (PFRDA).
Impact:
This reservation framework strengthens the role of domestic institutional investors, ensuring that a significant portion of anchor allocations benefits Indian market participants. It also deepens the domestic capital base, aligns with SEBI’s broader goal of promoting long-term stability, and reduces reliance on foreign institutional capital in IPOs.
3. Why This Amendment Matters
This amendment reflects SEBI’s ongoing commitment to:
- Enhancing transparency in capital allocation during IPOs,
- Encouraging greater institutional participation from mutual funds, insurers, and pension funds, and
- Balancing investor protection with market efficiency.
By diversifying the anchor investor framework, SEBI not only reduces systemic risks but also fosters a more inclusive investment environment that benefits both issuers and investors.
Moreover, prioritizing domestic institutional investors ensures that the wealth generated through capital markets increasingly remains within India’s financial ecosystem—a move that aligns with the vision of building self-reliant and sustainable capital markets under the broader umbrella of Atmanirbhar Bharat.
Conclusion
The SEBI (ICDR) (Third Amendment) Regulations, 2025 mark another important reform in India’s capital market framework. Through better-defined investor participation norms and a focused push for domestic institutional engagement, SEBI continues to uphold its mandate of ensuring fairness, transparency, and investor protection in capital raising processes.
As India’s IPO market continues its upward trajectory, these regulatory updates will play a pivotal role in bolstering investor confidence, improving price discovery, and promoting the long-term health of India’s financial markets.