Introduction
In September 2025, the Securities and Exchange Board of India (SEBI) rolled out a sweeping set of reforms to strengthen India’s capital markets and attract global investors. These changes focus on easing requirements for large initial public offerings (IPOs), revising norms on minimum public shareholding, widening the scope of anchor investors, and simplifying the entry process for foreign portfolio investors. Collectively, the reforms are designed to increase liquidity, enhance participation, and make Indian markets more competitive at the global level.
Regulatory Background
SEBI’s authority flows from the SEBI Act, 1992, which empowers it to regulate and protect investors while fostering market development. IPO and disclosure rules are primarily governed by the Securities Contracts (Regulation) Rules, 1957 (SCRR), the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
Before the 2025 amendments, companies—especially those with very large market capitalisations—faced stricter dilution requirements, limited flexibility in anchor allotments, and relatively shorter compliance timelines for achieving minimum public shareholding.
Key Reforms Introduced
1.Reduced Minimum Public Offer/MPO
- For companies with post-issue market capitalisation above ₹5 lakh crore, the mandatory public float has been halved from 5% to 2.5%.
- For issuers between ₹1 trillion and ₹5 trillion, revised thresholds apply (around 2.75%) alongside fixed floor amounts, ensuring a balance between investor access and promoter dilution.
2.Extended Timelines for Minimum Public Shareholding (MPS)
- If public shareholding is below 15% at listing, companies now have 5 years to raise it to 15% and up to 10 years to meet the full 25% requirement.
- Where shareholding is 15% or higher, issuers have 5 years to reach the 25% threshold. This flexibility is particularly relevant for mega-IPOs.
3.Expand And Enhance Anchor Investor Framework
- Anchor allocation has been increased from one-third to 40% of the total anchor book.
- Life Insurance Corporation of India (LIC), pension funds, and other institutional investors can now participate alongside mutual funds.
- Greater flexibility is provided through lower allotment sizes, more anchor allottees, and relaxations for foreign portfolio investors managing multiple funds.
4.SWAGAT FI Framework for Foreign Investor
- SEBI has launched the Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI).
- The framework caters to low-risk entities such as sovereign wealth funds, insurance companies, and regulated retail funds, offering a simplified registration process, reduced documentation, and longer validity periods (up to 10 years).
5.Related Party Transaction and Disclosure Norms
- Materiality thresholds for RPTs are now scale-based, linked to company turnover, thereby easing compliance for smaller transactions.
- Strengthened governance requirements for stock exchanges and market infrastructure institutions, including appointment of additional executive directors for oversight of operations and compliance.
6.Mutual Funds
- Exit load for mutual funds reduced from 5% to 3%.
- Distributor incentives revised to encourage participation from women investors and from Real Estate Investment Trusts (REITs) reclassified as equity instruments for mutual funds, increasing their investability and possible index inclusion.
Implication & Analysis
For Large Issues
- Reduced MPO lowers the dilution burden, allowing mega-corporations to raise capital without flooding the market with shares.
- Longer timelines for meeting public shareholding requirements provide greater flexibility in promoter exits and smoother capital planning.
For Foreign Investors
- The SWAGAT-FI system significantly reduces administrative hurdles, boosting confidence among long-term institutional investors like pension and sovereign funds.
- Eased entry norms are expected to channel stable capital inflows, moving away from a dominance of short-term speculative activity.
For Retail Investors & Market Depth
- An expanded anchor investor pool could improve pricing efficiency and reduce IPO volatility.
- Lower mutual fund exit loads make investment more attractive to small investors.
- However, reduced initial public float could limit retail access in the short run, making it important for SEBI to ensure safeguards for fairness and liquidity.
For Legal / Regulatory Landscape
- Amendments to SCRR and ICDR Regulations are needed; the reforms require notification, rule changes, possibly by Parliament or relevant ministries for the SCRR changes.
- Companies and intermediaries will need to adjust practices: IPO drafting, regulatory filings, disclosures, anchor book structuring, investor agreements.
- Increased compliance monitoring will be required: track time-bound obligations, monitor RPTs, disclosures for foreign investor categories.
Conclusion
SEBI’s 2025 reforms represent a strategic move to position India as a preferred global investment hub. By balancing flexibility for large issuers with protections for investors, and by creating a friendlier environment for foreign capital, SEBI is laying the groundwork for deeper and more resilient markets. Nevertheless, effective implementation, continuous monitoring, and periodic review of these measures will determine whether the intended benefits are fully realised.