Description

SEBI notifies amendments to anchor investor allocation norms under ICDR Regulations, effective from third day of gazette publication dated October 31, 2025.

Summary

SEBI has issued the third amendment to the ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2018, modifying Schedule XIII regarding anchor investor allocation norms. The amendments become effective from November 3, 2025 (third day from gazette publication on October 31, 2025). Key changes include revised investor limits based on allocation size and enhanced reservation for domestic mutual funds, life insurance companies, and pension funds.

Key Points

  • Notification issued under File No. SEBI-LAD-NRO/GN/2025/271 dated October 31, 2025
  • Amendments to Para (10) of Part-A of Schedule XIII of SEBI ICDR Regulations, 2018
  • New tiered structure for anchor investor allocation based on amount ranges
  • Mandatory 40% reservation for specified domestic institutional investors
  • 33.33% reserved for Indian mutual funds and 6.67% for life insurance companies and pension funds
  • Undersubscribed portion from insurance/pension allocation can be allotted to mutual funds

Regulatory Changes

Modified Anchor Investor Allocation Limits (Sub-para (g), Clause (I)):

For allocation up to Rs. 250 crores:

  • Minimum 2 and maximum 15 anchor investors permitted
  • Each investor must receive minimum allocation of Rs. 5 crores

For allocation exceeding Rs. 250 crores:

  • First Rs. 250 crores: minimum 5 and maximum 15 anchor investors
  • Each subsequent Rs. 250 crores (or less): additional 15 investors permitted
  • Minimum allocation per investor remains Rs. 5 crores

Reservation Framework (Sub-para (gh)):

40% of anchor investor portion (within limits specified in sub-para (kh)) must be reserved as follows:

  1. Indian Mutual Funds: 33.33% reservation
  2. Life Insurance Companies and Pension Funds: 6.67% reservation combined

Undersubscribed portion from 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 (IRDAI) under Insurance Act, 1938
  • Pension Fund: Fund registered with Pension Fund Regulatory and Development Authority (PFRDA) under PFRDA Act, 2013

Compliance Requirements

  • Issuers and merchant bankers must apply new allocation norms for all anchor investor allocations from November 3, 2025
  • Ensure minimum 40% reservation for domestic institutional investors (mutual funds, insurance, pension funds) within anchor book
  • Comply with revised investor count limits based on allocation size tiers
  • Maintain minimum Rs. 5 crore allocation per anchor investor
  • Document eligibility of life insurance companies and pension funds through IRDAI/PFRDA registration

Important Dates

  • October 31, 2025: Gazette notification published
  • November 3, 2025: Amendments become effective (third day from gazette publication)
  • Applies to all public issues with anchor investor allocation from effective date

Impact Assessment

Market Impact:

  • Enhanced participation opportunity for domestic institutional investors in IPO anchor rounds
  • Greater allocation certainty for Indian mutual funds with 33.33% mandatory reservation
  • Increased flexibility for large issues with tiered investor limits allowing up to 30+ anchor investors for allocations exceeding Rs. 500 crores

Operational Impact:

  • Issuers and merchant bankers need to revise anchor allocation processes and documentation
  • Enhanced focus on domestic institutional investor participation rather than foreign anchor investors
  • More complex allocation calculations required for issues exceeding Rs. 250 crores

Regulatory Impact:

  • Strengthens domestic institutional participation in price discovery process
  • Aligns with regulatory objective of promoting domestic capital in primary markets
  • Life insurance companies and pension funds gain specific recognition and reservation in anchor category

Impact Justification

Material regulatory change affecting anchor investor allocation process in public issues; impacts issuers, merchant bankers, and institutional investors participating in IPOs