SEBI Changes Anchor Investor Framework to Boost Domestic Institutional Participation in IPOs

New Delhi, November 7: The Securities and Exchange Board of India (SEBI) has changed the process of share-allocation for anchor investors in the initial public offerings (IPOs). SEBI has introduced the key changes to ensure more domestic institutions can participate in the anchor allocation of IPOs. These include, mutual funds, pension funds, and insurance companies.

The New Share-allocation Structure

Under the new share-allocation structure, the total reservation for the anchor investor portion has been increased to 40%. This is now higher than the current 33% reservation. Of the new 40% reservation, 33% will be for mutual funds, and 7% will be for insurance companies and pension funds. Furthermore, if the 7% reservation is not fully subscribed, mutual funds will get the remaining percentage reservation.

Changes in Number of Investors For Large IPOs

SEBI has also announced that it has increased the number of anchor investors who are permitted to participate in large IPOs. As per SEBI, 15 anchor investors will now be allowed per ₹250 crore. This is for IPOs with a higher anchor portion than ₹250 crore. The limit was 10 investors until now. On the other hand, a minimum of 5 and a maximum of 15 investors will be permitted, for IPOs with a higher anchor portion than ₹250 crore. SEBI has fixed the minimum allotment size of ₹5 crore per investor.

What Do the New Rules Mean?

SEBI’s new anchor investor framework will lead to increased participation of domestic institutional investors when IPOs open their anchor allocation round. The new rules will help reduce the dependence of Indian companies on foreign anchor investors. Furthermore, the increase in the number of anchor investors for large IPOs will help provide transparency and diversification in the IPO allocation process.

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