The Indian investment landscape looks forward to be getting overhauled with revision in the IPO rules. The capital markets are entering a new age with the Securities and Exchange Board of India (SEBI) introducing radical changes to the IPO structure in July and August 2025, taking effect from 1st August. The reforms look to strengthen transparency, protect investors, and place the nation’s thriving IPO market on par with international best practices.
Key Highlights of the New IPO Rules
- Revised Allocation Pattern Big IPOs (>₹5,000 crore): SEBI has suggested lowering the retail portion from 35% to 25% in public issues over ₹5,000 crore, with Qualified Institutional Buyers (QIBs) having their share boosted to 60%. This rebalancing aims to capture subdued retail subscription patterns in large IPOs and induce deeper institutional participation.
- Anchor Investor Pool Enlarged: Additional anchor investors will be allowed in large-value IPOs (anchor allocation of over ₹250 crore), such as international funds, insurance companies, and pension funds, increasing their reservation from 30% to 40% of the anchor book.
Tighter Pricing, Allotment, and Disclosure Norms –
- Price Band Announcement: Firms are required to announce their IPO price band in newspapers two working days before opening and only one advertisement (both pre-issue and price notification) is currently required.
- Minimum Application Size & Participation: The minimum application size is raised to two lots (worth over ₹2 lakh), pushing the IPO process in favour of more serious investors and preventing speculative bids—especially in SME IPOs.
- Non-Institutional Investor (NII) Allotment: Allotment for NIIs is now divided—one-third for applications of ₹2 lakh to ₹10 lakh and the remaining for higher investments. The minimum allottees for SME IPOs rise from 50 to 200, favouring wider participation.
- Fund Monitoring and Utilisation: Stricter Use of Funds: Proceeds cannot be utilised for repayment of loans to promoters or related parties, and the maximum funds for “General Corporate Purpose” are now the lower of ₹10 crore or 15% of issue (compared to 25%.
- Enhanced Monitoring: IPOs involving over ₹50 crore have to hire a credit rating agency for monitoring the utilisation of funds (reduced from ₹100 crore). For small issues, statutory auditors have to validate utilisation on a quarterly basis.
- Greater Transparency and Due Diligence: Detailed use-of-funds plans, business risks, three years of promoter background, and all litigation have to be disclosed by companies. The draft offer documents will be put in the public domain for 21 days for comments, enhancing scrutiny.
Faster and Safer Processes:
- Listing Timeline:IPO closure to listing timeline is shortened from T+6 to T+3 days, providing liquidity and quicker refunds to investors.
- UPI Mandate: Retail applications are subject to UPI-linked bank accounts, making payments easier and fraud risk lower.
- Anchor Lock-In: Anchor investors have to keep at least 50% of their holdings for 90 days from the date of listing to suppress post-listing volatility.
Implications
These reforms are focusing on developing a more balanced, transparent, and sturdy IPO market in India. While institutional investors benefit from more powerful protection and seamless processes, large institutional buying is promoted—facilitating a deeper capital market and increased confidence for all stakeholders.
