SEBI Overhauls IPO Anchor Investor Rules to Boost Domestic Institutional Participation

The Securities and Exchange Board of India (SEBI) has introduced significant amendments to the share allocation framework for anchor investors in Initial Public Offerings (IPOs). This reform aims to enhance the participation of domestic institutional investors, including mutual funds, insurance companies, and pension funds.

Key Changes: * **Increased Anchor Portion**: The total reservation for anchor investors in an IPO has been raised from 33% to 40% of the total issue size. * **Specific Allocations**: Within this 40%, 33% is now earmarked specifically for mutual funds. The remaining 7% is designated for insurance companies and pension funds. If this 7% is not fully subscribed, it will be reallocated to mutual funds. * **More Anchor Investors**: For IPOs with an anchor portion exceeding Rs 250 crore, the number of permissible anchor investors has been increased from 10 to 15 for every Rs 250 crore block. This means a minimum of 5 and a maximum of 15 investors can be allocated shares up to Rs 250 crore, with a minimum allotment of Rs 5 crore per investor. * **Category Merging**: The previous discretionary allotment categories have been merged into a single category for allocations up to Rs 250 crore.

The overarching goal of these revised norms, which amend the ICDR (Issue of Capital and Disclosure Requirements) regulations and take effect from November 30, is to attract and broaden the participation of stable, long-term institutional investors in the primary market.

Impact: These changes are expected to make IPOs more attractive to domestic institutions, potentially leading to better price discovery and stability during the listing process. By ensuring a larger share for trusted domestic players, SEBI aims to reduce reliance on foreign institutional investors and create a more robust primary market ecosystem. Rating: 8/10

Definitions: * **Initial Public Offering (IPO)**: The first time a private company offers its shares to the public for trading on a stock exchange. * **Anchor Investor**: A large institutional investor who commits to buying shares in an IPO before the public offering opens. They help build confidence in the issue. * **ICDR Norms**: Regulations governing the Issue of Capital and Disclosure Requirements, set by SEBI for companies raising capital from the public.