SEBI Proposes Cutting Retail Quota in Large IPOs; Seven Upcoming Offers Face the Change

The Securities and Exchange Board of India (SEBI) has proposed significant reforms to the structure of large initial public offerings (IPOs), particularly those above ₹5,000 crore. In a recent consultation paper, SEBI suggests reducing the retail investor allocation from 35% to as low as 25%, while increasing Qualified Institutional Buyer (QIB) allocation from 50% to 60% in a graded fashion. This policy shift affects at least seven major IPOs in the pipeline, including offerings from Tata Capital, LG Electronics, Credila Financial Services, ICICI Prudential AMC, Inox Clean Energy, Billionbrains Garage Ventures (Groww), and the National Stock Exchange.

Changing Retail Participation Trends

SEBI’s move follows analysis showing that although IPO sizes have surged, retail participation has plateaued over the past three years. Even high‑value IPOs often see muted direct participation by retail investors, prompting SEBI to propose targeted reductions in retail allocation as IPO size increases. The regulator aims to better align allocation structures with market realities and demand patterns.

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Institutional and Anchor Investor Reforms

In parallel, SEBI has recommended expanding the quota for anchor investors and recalibrating reserved categories. The regulator proposed increasing anchor investor allocation from the current 33% to 40%, specifically reserving 7% for insurance companies and pension funds, while retaining one-third for domestic mutual funds. The number of anchor investors allowed per ₹250 crore of issue size would also increase. These changes are intended to boost long-term institutional support and improve price stability for large IPOs.

Why These Changes Matter

By shifting share allocation towards institutional buyers and anchor investors, SEBI aims to enhance pricing efficiency and reduce overreliance on retail participation. Analysts believe the new allocation framework may address subscription uncertainties in mega IPOs and promote smoother listing dynamics. SEBI is inviting public feedback on these proposals until August 21, 2025.

Affected IPOs and Scale

The seven major IPOs currently listed as likely to qualify under SEBI’s new retail quota norms include: 

• ₹15,000 crore LG Electronics issue; 
• ₹18,000 crore Tata Capital; 
• ₹10,200 crore ICICI Prudential AMC; 
• ₹6,000 crore Inox Clean Energy, among others. 

Moving to a smaller retail allocation ratio would influence allotment volumes and investor reach in these marquee deals.

Conclusion

SEBI’s proposed IPO reforms signal a strategic realignment of the capital market framework. By reducing retail quotas in large offerings while bolstering anchor and institutional participation, the regulator aims to deliver more stable IPO pricing, enhance demand quality, and bring regulatory norms in line with prevailing market dynamics. If adopted, these reforms could reshape participation strategies across major upcoming listings.