SEBI Proposes Overhaul of IPO Allocation Structure, Cuts Retail Quota

India's Securities and Exchange Board (SEBI) has unveiled sweeping changes to IPO allocation rules, signaling a shift toward institutional dominance in large public offerings. The regulator plans to reduce retail investors' share from 35% to 25% in a phased manner while boosting institutional allocation to 60%.

The MOVE comes as direct retail participation stagnates despite growing IPO sizes. SEBI noted particularly muted retail interest in large offerings, with subscription levels remaining flat for three consecutive years. Public comments on the proposal are due by August 21.

Concurrently, SEBI aims to broaden institutional participation by expanding the anchor investor framework. For IPOs exceeding ₹250 crore, the number of permissible anchor allottees will increase—a strategic play to accommodate foreign portfolio investors managing multiple funds. Insurance companies and pension funds may soon join mutual funds in the reserved anchor investor category.