SEBI Expands IPO Anchor Book Size to Boost Domestic Institutional Participation

Context:

The Securities and Exchange Board of India (SEBI) has amended its regulations to revamp the share allocation framework for anchor investors in initial public offerings (IPOs). The move is designed to enhance domestic institutional participation, particularly from mutual funds (MFs), insurance companies, and pension funds.

Increased Anchor Portion Reservation

• What changed: The total portion of shares reserved for anchor investors in an IPO has been increased from 33% to 40%.
• Breakup:
  • Mutual funds: 33%
  • Insurance companies and pension funds: 7%
• Reason: This ensures more participation from long-term institutional investors, while also prioritizing mutual funds if the 7% reserved for insurers/pension funds is not fully subscribed.

Simplified: More shares are reserved for anchor investors, and mutual funds get extra if insurance/pension funds don’t take their full share.

Higher Number of Anchor Investors

• What changed: For IPOs with a large anchor portion (> ₹250 crore), the number of anchor investors allowed is increased from 10 → 15 per ₹250 crore.
• Minimum and maximum:
  • Up to ₹250 crore: 5–15 investors
  • For every additional ₹250 crore (or part): 15 more investors, each getting at least ₹5 crore.

Simplified: Bigger IPOs now allow more anchor investors, reducing concentration and spreading investment among multiple long-term players.

Simplification of Discretionary Allotment

• What changed:
  • Earlier, discretionary allocation to anchors had two categories:
    • Category I: up to ₹10 crore
    • Category II: ₹10–250 crore
  • Now, both categories are merged into a single category for allocations up to ₹250 crore.
• Effect: Minimum 5 anchor investors, maximum 15, minimum allocation ₹5 crore each.

Simplified: The allocation process is easier and more uniform for anchors, avoiding complicated categories.

Regulatory Update

• These changes are part of ICDR (Issue of Capital and Disclosure Requirements) rules.
• Effective date: 30 November 2025