India’s markets regulator Sebi has proposed a serious overhaul of itemizing norms to deal with flagging retail investor participation in massive listings.
In a session paper launched on Thursday, the Securities and Change Board of India (Sebi) has advised a versatile retail allocation framework for preliminary public choices (IPOs) which are larger than ₹5,000 crore, permitting the retail quota to drop from 35% to as little as 25% in a staggered method, whereas boosting the QIB (certified institutional purchaser) share from 50% to 60% to make sure demand stability.
The market watchdog has invited public feedback until 21 August.
Versatile retail allocation
The proposals, which might reshape the allocation construction for home equities, purpose to align IPO buildings with market realities—corresponding to surging mutual fund flows and rising common problem sizes—whereas safeguarding long-term investor confidence.
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“Given the allocation methodology and expertise in latest offers, these massive retail parts require lakhs of retail candidates for the class to be totally subscribed,” the session notes.
For a ₹5,000 crore IPO, the minimal retail utility measurement requires about 700,000–800,000 bidders. For larger IPOs corresponding to, say, a ₹10,000 crore providing, the quantity rises to at the very least 1.75 million functions.
Regardless of sturdy inflows into mutual funds—the place retail funding through systematic funding plans (SIPs) hit a month-to-month report of ₹26,688 crore in Might—direct participation by retail traders in IPOs has plateaued.
Current offers present that, whereas retail demand stays excessive for choose big-ticket listings corresponding to LIC and Bajaj Housing Finance, many massive IPOs see undersubscription from each retail and non-institutional investor (NII) classes.
Examples from Sebi’s session paper embody Hyundai Motor’s ₹27,859 crore IPO, the place retail portion was subscribed at simply 0.4x; Hexaware Applied sciences’ ₹8,750 crore IPO (retail subscription 0.1x); and Afcons Infra’s ₹5,430 crore IPO that noticed retail subscription at 0.9x.
In distinction, mutual fund participation through SIPs and as QIBs has been surging. Retail funding through SIPs (systematic funding plans) reached a report month-to-month excessive of ₹26,688 crore in Might 2025. And the mutual fund trade’s belongings below administration (AUM) crossed ₹70 trillion in Might 2025, signalling sturdy and regular inflows from retail traders by way of funds.
Presently, for many huge IPOs, at the very least 35% of shares needed to be stored apart for retail traders. Sebi has now proposed to maintain 35% of the primary ₹5,000 crore price of shares for small traders. For any quantity above that, solely 10% must be put aside for them. Nevertheless, at a minimal, small traders will all the time get at the very least 25% of the full shares, irrespective of how huge the IPO is.
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If the shares for small traders usually are not all taken up, the leftover shares will go to huge establishments (corresponding to mutual funds, insurance coverage corporations, banks, and many others.), ensuring all of the shares can get offered easily.
To offset the decreased retail allocation, the paper proposes ramping up the reservation for home mutual funds within the non-anchor QIB class from the present 5% to fifteen%. In response to Sebi, this may guarantee continued excessive ranges of efficient retail participation, combining direct and mutual fund funding routes.
