MUMBAI: India’s markets regulator on Friday unleashed a package of reforms designed to galvanise the capital markets by enhancing the ease of doing business, liberalizing norms for large public offerings, and strengthening governance across market segments including stock exchanges.
The decisions, taken by the Securities and Exchange Board of India (Sebi) at its board meeting, are set to significantly impact everything from mega IPOs (initial public offerings) and related-party transactions to the functioning of market intermediaries.
IPO norms and fundraising liberalized
In a move to attract marquee listings, Sebi has eased stake dilution norms for very large companies and broadened the investor base.
Companies with a post-issue market capitalization between ₹50,000 crore and ₹1,00,000 crore can now have a minimum issue size of ₹1,000 crore plus 8% and will have five years to meet the 25% minimum public shareholding (MPS) rule.
For firms valued above ₹1,00,000 crore, the dilution requirements and timelines for MPS have been further relaxed.
The number of anchor allottees for IPOs up to ₹250 crore will increase to up to 15 allottees, with a minimum of five. Insurance companies and pension funds will now be included in the reserved anchor allocation, with the total reserved portion for institutional players rising from 33% to 40%.
Governance and Compliance Rejigged
The board also cleared key changes to corporate governance and compliance rules, aiming to make operations easier while safeguarding investors.
A new turnover-based framework will determine the materiality of RPTs, easing the compliance burden for large listed entities. The current threshold of ₹1,000 crore or 10% of turnover will be replaced by a graduated system linked to a company’s scale.
To strengthen governance at stock exchanges and other market infrastructure institutions (MIIs), Sebi has mandated the appointment of at least two executive directors to head key verticals alongside the managing director.
Stockbroker regulations have been revamped to align with current market practices, with a focus on stronger governance, client protection, and updated definitions for proprietary and algorithmic trading.
New Avenues for Investment
Sebi has greenlit proposals to deepen the market by creating new investment pathways and reclassifying existing instruments.
REITs (real estate investment trusts) and InvITs (infrastructure investment trusts) will now be granted equity status, allowing mutual funds to include them in equity schemes. This is expected to boost liquidity and increase access for retail investors.
The scope for “strategic investors” in REITs and InvITs has also been widened to include foreign investors and most qualified institutional buyers (QIBs).
A new “AI-only” AIF scheme exclusively for accredited investors will be introduced with a lighter regulatory framework, including no cap on the number of investors and an extended tenure. The minimum investment for large value funds (LVFs) has also been lowered from ₹70 crore to ₹25 crore.
The board has facilitated the participation of resident Indians in FPIs by allowing retail schemes based in International Financial Services Centres (IFSCs) with Indian sponsors or managers to register as FPIs.
Streamlining for Intermediaries
The regulator also approved measures to simplify operations for market intermediaries.
Credit rating agencies (CRAs) are now permitted to rate financial instruments overseen by other regulators like the RBI and Irdai, provided these activities are conducted through a ring-fenced separate business unit.
Norms for investment advisors (IAs) and research analysts (RAs) have been eased, including simplifying the registration process by removing the need for certain documents and relaxing educational qualifications. They will also be allowed to share past performance data with clients upon request, with appropriate disclaimers.
