The much-awaited SEBI board meeting finally concluded today, bringing clarity on several market-related regulations and policy changes. The outcome covers a wide range of areas including IPO norms, mutual funds, REITs, anchor investors, foreign investors, F&O trading, and governance-related matters. These announcements are expected to have a significant impact on the Indian capital markets starting from next week.
One of the most anticipated developments was the relaxation of minimum public shareholding (MPS) norms for large IPOs. Companies with a market capitalization between Rs 5,000 crore and Rs 1 lakh crore will now have five years, instead of three, to meet the requirement of 25 percent public shareholding. For very large companies, the relaxation period has been extended to as much as 10 years. This change is crucial for large IPOs where even a 1 percent stake is valued at thousands of crores, making quick dilution difficult. A recent example is LIC, which diluted just 3.5 percent in its Rs 21,000 crore IPO. Such companies will now have the flexibility of up to 10 years to comply with the 25 percent threshold.
The minimum public offer size requirement for mega IPOs has also been revised. For companies with a market capitalization between Rs 1 lakh crore and Rs 5 lakh crore, the minimum offer size has been set at Rs 6,250 crore or 2.75 percent of post-issue market cap. For companies above Rs 5 lakh crore market cap, the requirement will be Rs 15,000 crore or 1 percent of post-issue market cap, with a minimum dilution of 2.5 percent. In short, large companies can now enter the market by diluting smaller stakes, instead of being forced to offload larger chunks.
Anchor investor rules have also been modified. A separate anchor quota has been proposed for domestic insurance companies and pension funds. The move is aimed at encouraging participation from long-term institutional investors, strengthening the stability of IPO investments.
On the foreign investor front, SEBI has announced a simplified single-window framework for FIIs and FPIs. Compliance requirements are being eased to ensure smoother entry and operations for foreign investors in the Indian market.
One of the most significant announcements came for mutual fund investors. The maximum exit load on mutual funds has been reduced from 5 percent to 3 percent. This is a major relief for investors who wish to redeem units early, as the penalty has been lowered. While this is good news for investors, it could hurt asset management companies (AMCs), which earlier benefitted from the higher exit load. Lower exit loads might also encourage more early redemptions.
In the case of REITs and InvITs, SEBI has officially classified REITs as equity instruments, making them eligible for inclusion in mutual fund portfolios. This move provides REITs with better visibility and access to a broader investor base. On the other hand, InvITs will continue to be classified as hybrid instruments.
The meeting also addressed the hotly debated issue of F&O trading, particularly weekly expiries. SEBI has confirmed that a consultation paper will soon be released regarding the possible discontinuation of weekly option expiries, limiting them to monthly contracts instead. This step is being considered to reduce retail investor losses, which have been consistently high in weekly derivatives trading. If implemented, the shift from 52 expiries in a year to just 12 could significantly alter the F&O landscape. The consultation paper is expected to be released as early as next month.
Other important governance-related decisions were also announced. SEBI will now have two new executive directors to strengthen regulatory oversight. Related party transaction thresholds have been redefined, and new regulations for registrars and transfer agents have been introduced. Education criteria for those seeking to become investment advisors or research analysts have also been simplified, making entry easier into these professions.
Further, Indian mutual funds investing in foreign mutual funds will now be allowed to do so via the FPI registration route. In addition, the anchor investor quota has been fixed at 40 percent, with 7 percent reserved for the newly introduced participants — domestic insurance companies and pension funds.
Overall, SEBI’s board meeting brought several expected and a few surprise outcomes. From easing IPO norms to reducing exit loads and addressing the risks in F&O trading, these changes reflect SEBI’s focus on balancing market growth with investor protection. The impact of these reforms will start becoming visible in the coming weeks as companies, institutions, and investors adapt to the new regulatory environment.
