Description
SEBI notification amending anchor investor allocation rules under ICDR Regulations, modifying allocation limits and reservation requirements for mutual funds, insurance companies, and pension funds.
Summary
SEBI has issued the third amendment to ICDR Regulations 2018, modifying anchor investor allocation rules under Schedule XIII. The amendments introduce tiered allocation limits based on issue size and mandate specific reservations for domestic mutual funds (33.33%), life insurance companies, and pension funds (6.67%). The regulation becomes effective three days from October 31, 2025 publication date.
Key Points
- Notification number: SEBI-LAD-NRO/GN/2025/271 dated October 31, 2025
- Official name: SEBI [Issue of Capital and Disclosure Requirements] (Third Amendment) Regulations, 2025
- Effective date: Three days from gazette publication (October 31, 2025)
- Amends Schedule XIII, Part-A, Para 10 of SEBI ICDR Regulations 2018
- Introduces tiered allocation structure based on issue size thresholds of Rs 250 crore
- Minimum investment per anchor investor: Rs 5 crore
- 40% of anchor investor portion reserved for specified institutional categories
Regulatory Changes
Allocation Limits Amendment [Para 10(g)(I)]
For issues up to Rs 250 crore:
- Minimum 2 anchor investors required
- Maximum 15 anchor investors permitted
- Each investor must receive minimum Rs 5 crore allocation
For issues exceeding Rs 250 crore:
- First Rs 250 crore: minimum 5 investors, maximum 15 investors
- Each subsequent Rs 250 crore (or less): additional 15 investors permitted
- Each investor must receive minimum Rs 5 crore allocation
Reservation Requirements [Para 10(gh)]
40% of anchor investor allocation (within limits specified in sub-para kh) reserved as follows:
- Indian Mutual Funds: 33.33%
- Life Insurance Companies and Pension Funds: 6.67%
Undersubscription provision: Any undersubscribed portion from the 6.67% life insurance/pension fund reservation can be allocated to Indian mutual funds.
Definitions Added
- Life Insurance Company: Entity registered with Insurance Regulatory and Development Authority of India under Insurance Act, 1938
- Pension Fund: Fund registered with Pension Fund Regulatory and Development Authority under PFRDA Act, 2013
Compliance Requirements
For Issuers
- Apply new allocation structure for determining maximum anchor investors
- Ensure 40% of anchor portion is reserved per specified breakup
- Allocate undersubscribed life insurance/pension fund portion to mutual funds
- Maintain minimum Rs 5 crore allocation per anchor investor
For Book Running Lead Managers
- Implement revised allocation mechanism in anchor book building
- Verify investor categorization (mutual funds, insurance, pension funds)
- Apply reservation waterfall: life insurance/pension funds first, then mutual funds for remaining
- Ensure compliance with investor number caps per issue size tier
For Anchor Investors
- Minimum bid amount: Rs 5 crore per investor
- Mutual funds have priority access to any undersubscribed reserved portion
Important Dates
- Notification Date: October 31, 2025
- Effective Date: Three days from October 31, 2025 (approximately November 3, 2025)
- Applicability: All IPOs with anchor investor portions post-effective date
Impact Assessment
Market Impact
- Enhanced participation: Tiered structure allows more anchor investors in larger issues, potentially improving price discovery
- Domestic institutional priority: 40% reservation strengthens domestic institutional participation in IPO pricing
- Mutual fund advantage: MF industry gets 33.33% reserved allocation plus access to undersubscribed insurance/pension quota
Operational Impact
- Issue structuring: Issuers must calculate maximum anchor investors based on multiple Rs 250 crore tranches
- Allocation complexity: BRLMs need systems to handle tiered investor caps and cascading reservation waterfall
- Documentation: Enhanced disclosure requirements for reserved category compliance
Regulatory Impact
- Aligns with SEBI’s objective of strengthening domestic institutional participation
- Reduces concentration risk by capping investors per tranche
- Provides preference to regulated domestic long-term investors (pension funds, insurance)
- May reduce dependency on foreign anchor investors in large issues
Impact Justification
Critical regulatory amendment affecting IPO anchor investor allocation mechanism, reservation requirements, and investment limits for institutional investors