Sebi suggests cutting retail quota into large IPOs to 25% to increase the stability of the listing | Einsmark news

Indian market regulator Sebi suggested a great review of the listing of norms to address the participation in small investors in major lists. In a consultation document released on Thursday, the Securities and Exchange Board of India (Sebi) proposed a flexible retail entrance framework for initial public offers (IPOs) larger than £ 5,000, which causes the retail quota of 35% to as low as 25% in a stamped way, while the QIB 60 until the claim is increased. The market watchdog invited public comments to August 21. Flexible retail allocation The proposals, which can reform the award structure for domestic equity, are aimed at aligning IPO structures with the market realities-as to increase the mutual fund flow and growing average outreach sizes-while protecting long-term confidence in long-term investors. “Given the allocation methodology and experience in recent offers, these large retail sections require that lakhs retail applicants for the category must be fully logged into,” the consultation states. For a £ 5,000 crore IPO, the minimum retail application size needs about 700,000 to 800,000 bidders. For larger IPOs such as, for example, a £ 10,000 crore offer, the number rises to at least 1.75 million applications. Despite the strong inflow into mutual funds – where retail investment via systematic investment plans (SIPs) scored a monthly record of £ 2688 crore in May – retail investors participated in IPOs. Recent transactions show that, although retail question remains great for selected big ticket lists such as LIC and Bajaj Housing Finance, very large IPOs see undercovering from both retail and non-institutional investors (NII) categories. Examples from Sebi’s consulting document include Hyundai Motor’s £ 27,859 Crore IPO, where the retail section is subscribed to only 0.4x; Hexaware Technologies’ £ 8,750 Crore IPO (retail subscription 0.1x); And AFCONS Infra’s £ 5.430 IPO is at a retail subscription to 0.9x. In contrast, participation in mutual funds via SIPs and as QIBs rose. Retail investment via SIPs (systematic investment plans) reached a record high of £ 26,688 crore in May 2025 and the assets of the mutual fund industry under management (AUM) crossed £ 70 billion in May 2025, which is an indication of strong and steady inflow of retail investors by funds. For most major IPOs, at least 35% of the shares currently had to be kept aside for retail investors. Sebi has now suggested to hold 35% of the first shares worth £ 5,000 for small investors. For any amount above, only 10% should be set aside for them. However, small investors will get at least 25% of total shares, no matter how big the stock exchange is. If the shares for small investors are not all recorded, the remaining shares will go to large institutions (such as mutual funds, insurance companies, banks, etc.), make sure all the shares can be sold smoothly. To compensate the reduced retail allocation, the article suggests that the discussion for domestic mutual funds in the non-anchor CIB category of the current 5% to 15% be increased. According to Sebi, it would ensure continued high levels of effective retail participation, combining direct and mutual fund investment routes.