Sebi Simplifies Regulations for Foreign Investors and IPOs
Sebi has announced significant reforms aimed at easing the process for companies planning to go public in India. These changes include relaxed minimum dilution norms for initial public offerings (IPOs) and the establishment of a streamlined system for low-risk foreign investors. The move comes in response to a notable withdrawal of foreign investments from Indian markets, totaling $11.7 billion in 2025, attributed to various economic factors. Additionally, Sebi has implemented stricter governance measures for stock exchanges to enhance operational integrity.
Revised IPO Regulations
The Securities and Exchange Board of India (Sebi) has revised its regulations concerning IPOs, particularly for companies with a market capitalization between Rs 1 lakh crore and Rs 5 lakh crore. The minimum public offer requirement has been increased from Rs 5,000 crore to Rs 6,250 crore, alongside a new stipulation that mandates at least 2.8% of the post-issue market capitalization to be offered to the public. Companies that initially list with less than 15% public float will now have a decade to meet the 25% minimum public shareholding requirement, while those starting with 15% or more will have five years to comply. These relaxed timelines will also apply to firms that have yet to meet existing regulations once they are officially notified by the government.
Changes to Anchor Investor Rules
Sebi has liberalized the rules governing anchor investors, increasing the overall quota from one-third to 40%. This change allows life insurers and pension funds to participate in the reserved pool, while mutual funds will retain a one-third share. Any shortfall in subscriptions from insurers and pension funds will revert to them. Furthermore, the number of permissible anchor investors has been expanded, with a minimum allotment size set at Rs 5 crore. These adjustments aim to attract more institutional investment into the Indian market, thereby enhancing liquidity and stability.
Streamlined Access for Foreign Investors
To bolster foreign investment in India, Sebi has introduced the Swagat-FI framework, which provides a single-window access system for “trusted” foreign portfolio and venture investors, including sovereign funds and central banks. This framework allows for a 10-year registration and Know Your Customer (KYC) cycle, a significant extension from the previous three-year requirement. Additionally, these investors will be exempt from the 50% aggregate contribution cap that applies to Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and resident Indians. To facilitate this process, Sebi and market infrastructure institutions have launched the India Market Access portal, which offers comprehensive guidance on FPI registration and compliance.
Mutual Fund and Related-Party Transaction Reforms
In the mutual fund sector, Sebi has reduced the maximum exit load from 5% to 3% and revised distributor incentives to encourage investments from smaller cities and women investors. Distributors can now earn up to 1% of the first application amount or Rs 2,000 for new investors from outside the top 30 cities, with additional commissions available for onboarding new women investors. Furthermore, Sebi has simplified regulations regarding related-party transactions by introducing a scale-based approach for shareholder approval. High-value transactions will require a vote, while low-value transactions will be exempt from disclosure. For companies with a turnover exceeding Rs 20,000 crore, approval is necessary for transactions surpassing 10% of turnover, while the threshold for firms with a turnover over Rs 40,000 crore has been significantly increased from Rs 1,000 crore to Rs 5,000 crore.
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