The Securities and Exchange Board of India (SEBI) on Thursday approved key changes to the anchor investor allocation mechanism in initial public offerings (IPOs), giving insurance companies and pension funds a bigger role in the anchor book.Life insurance companies registered with the Insurance Regulatory and Development Authority of India (IRDAI) and pension funds registered with the Pension Fund Regulatory and Development Authority (PFRDA) will now be part of the reserved category for the anchor portion, alongside domestic mutual funds.
The regulator has also raised the overall reservation for anchor investors from one-third to 40% of the IPO issue size. Of this, one-third will continue to be earmarked for domestic mutual funds, while the remaining portion will go to insurance companies and pension funds. Any undersubscription in the latter category will flow back to mutual funds, SEBI said in a press release.
SEBI also expanded the permissible number of anchor investors. For IPO allocations up to ₹250 crore, a minimum of 5 and a maximum of 15 anchor investors will be allowed. For every additional ₹250 crore or part thereof, an extra 15 investors may be added, subject to a minimum allotment of ₹5 crore per investor.The move comes after SEBI’s July consultation paper, which had proposed expanding anchor investor participation by including long-term institutional investors such as insurers and pension funds. The regulator had argued that greater diversity in the anchor book would strengthen market stability and improve price discovery in large IPOs.Market experts say the changes are likely to attract more long-term domestic capital into IPOs, reducing dependence on foreign institutional investors and adding depth to India’s capital markets.
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