SEBI boosts IPO stability by extending anchor book beyond MFs, includes insurance, pension funds

In a major development aimed at broadening the pool of long-term institutional investors in initial public offerings (IPOs), the Securities and Exchange Board of India (SEBI) on Friday amended the ICDR Regulations to extend anchor investor participation beyond domestic mutual funds. Under the revised framework, life insurance companies registered with IRDAI and pension funds registered with PFRDA can now participate in the reserved anchor portion. This step is expected to bring greater stability and inclusivity to IPO fund-raising while attracting patient capital.

Until now, the anchor book was exclusively available to mutual funds. The changes were approved in a SEBI board meeting chaired by Chairman Tuhin Kanta Pandey, his third since taking office in March. SEBI said the revision is aimed at diversifying the investor base, enhancing stability, and aligning India’s IPO framework with global practices.

Alongside the expansion of eligible anchor investors, SEBI has also streamlined the anchor allotment structure. The two discretionary allotment categories—Category I (up to Rs 10 crore) and Category II (Rs 10–250 crore)—have been merged into a single bucket for allocations up to Rs 250 crore. For such issues, there will be a minimum of five and a maximum of 15 anchor allottees, with each investor receiving at least Rs 5 crore worth of shares. For every additional ₹250 crore of allocation, 15 more anchor allottees will be allowed.

The overall reservation for the anchor portion has been increased from one-third to 40%. One-third of this allocation will continue to be earmarked for domestic mutual funds, while the remaining portion will be available for life insurance and pension funds. In the event of under-subscription in the reserved portion for insurance and pension funds, the shortfall will be reallocated to mutual funds.

SEBI said these measures are intended to attract long-term, stable capital, improve participation in IPOs, and provide better price support during initial listings. By including insurance and pension funds, which typically have longer investment horizons, the regulator aims to reduce volatility and enhance confidence among retail and institutional investors alike.