Expanding the Institutional Investor Base will provide much-needed flexibility in anchor investment structure | Photo credit: bloomberg
Market regulator recently came out with Major Initiatives With Respect to Primary Market. To make them vibrant and increase demand, it enlarged the base of anchor investors to include Insurance Companies and Pension Funds.
The Securities and Exchange Board of India (Sebi) said that in last five years, India’s captain markets have witnessed significed significed significed significant growth, supported by a Robustteed investor Participation across all categories.
The IPO market, in particular, has evolved with rising deal sizes, Deepening Institute Interest, and Growing Retail Involvement through BOTH BOTH DIRECT Applications and Mutual Funds (mfs). The average iPo size on the main board has increased, with even the smallest ipos typically exceding ₹ 300- ₹ 500 Crore.
Operational concerns
Following operational concerns raised by market participants, the regulator has relaxed the rules for anchor investors.
The limit on number of permissible anchor investor allottes based on the size of allocation has been increased, mainly to allow participation of Foreign Portfolio Investors (FPIS).
FPIS Had Complained That Since Each FPI Fund Required a Unique PAN, And Since Pan was the identifier for Each Investor, it was a constraint on Different on Different FPI FUNDS Ownership) to invest through anchor portion.
For anchor allocations Above ₹ 250 Crore, Sebi has increased the permissible number of anchor investors from 10 to 15 per cent ₹ 250 crore or part thereof. Besides, It Merged Category I and II Alternate Investment Funds (AIFS), so that all anchor allocations up to ₹ 250 Crore Permit TWO to 15 Investors, with Minimum Allotment of ₹ 5 Crore Crore Crore Crore Crore Crore.
It may be mentioned that the treatment of fipis is different compared to mfs where schemes of a fund are considered as a single application for allotment, Given Mf Has One PAN.
Insurance, Pension Funds
Besides, sebi have also enhanced norms so that life insurance companies and pension funds can participate in the anchor book by allowing life companies registered Authority of India (IRDAI) and Pension Funds Registered with Pension Fund Regulatory and Development Authority (PFRDA) to Participate in the anchor Portion Mutual Funds Category. The quota for mfs has increased from 33 per cent to 40 per cent in an ipo so that the two long-term institutions can participate in the ipo.
These proposals are welcome as it will help Improve Participation of Large FPIS with Multiple Funds and Reduce Artificial Constrants in anchor book. Expanding the Institutional Investor Base, No Doubt, Will Provide Much Needed Flexibility in Anchor Investor Structuring, and Boost Participation of Stable Capital Sources in Alignment with Best Global PRATICE.
However, it seems sebi has temporary shelved the proposal to cut retail quota in large ipos (in excess of ₹ 5,000 Crore) From 35 per cent to 25 per cent. Sebi said that decision was taken after reviewing the responses and examining alternative measures.
The Concerns of Large Issuers would be addressed in a broader manner by reduction the minimum dilution requirement at the time of ipo, without negativating any changes to the existing IPO Allocation Fraction Fraction Fraction Fraction Fraction Quota a 35 per cent).
Sebi can revisit the Norms Once Again and May Consider a Gradual Reduction from 35 per cent to 30 per cent and 25 per cent over the period, giving the number upcoming upcoming upcoming ipos such as tata capital, lg electrice Exchange.
Published on September 26, 2025