Introduction
To modernize India’s capital markets and create a more active financial environment, the Securities and Exchange Board of India (SEBI) has issued an array of major amendments to the regulation of initial public offering (IPOs) and the governance of Market Infrastructure Institutions (MIIs). These amendments demonstrate a proactive effort to improve market efficiency, safeguard investor interest, and facilitate domestic exchange listings by attracting larger, more valuable companies.
This article examines and highlights the important aspects of SEBI’s recent initiatives and how they will likely affect issuers, investors, and the market overall.
Relaxation of IPO Norms for Large Companies
The minimum public shareholding (MPS) and minimum public offer (MPO) rules have long caused trouble for big issuers, usually around complying with immediate dilution requirements. As such, SEBI has proposed a tiered framework which will provide substantial relief on coming IPO and MPS obligations for those companies whose market capitalization at issuance will rise to ₹50,000 crore or above. A first tier that seemed intended to encourage public float would permit these mega cap issuers to raise capital for 3 to 5 years, while still bringing the required minimum float to the market. In this way, SEBI has improved to balance the ongoing requirements for public float with the practical issues caused for mega-cap companies.
For companies in the ₹50,000 crore to ₹1 lakh crore range, the MPO requirement has been revised to ₹1,000 crore and a minimum of 8% of the post-issue share capital. Importantly, these companies now have five years (instead of three) to meet the MPS requirement of 25%. Having a longer time to conform to a capital commitment or MPS requirement lessens the immediate equity dilution impact, making domestic listings attractive to large companies and PSUs (Public Sector Undertakings). For large issuers greater than ₹1 lakh crore, the reforms also include being able to increase their public float over 10 years, depending on the amount of shareholding at the time of listing, which adds flexibility to the timeline. This phased timeline is written in recognition of the commentary that the magnitude of these offerings are so large that the market is unable to absorb them without causing significant price dislocations.
Governance and Accountability for MIIs
The regulatory overhaul of SEBI is not only limited to IPOs. It also emphasizes the need for more governance and accountability in MIIs with respect to stock exchanges and depositories. The new guidelines, based on the recommendations of the Committee on Strengthening of Governance of MIIs, establish stricter and clearer guidelines with greater oversight of governing boards of MIIs, as well as, increased responsibility of key management personnel (KMP), such as the Chief Risk Officer (CRIO) and Compliance Officer (CO).
The new rules also require MIIs to send at least two potential (candidates) for executive directors (ED) role for SEBI’s prior approval, so that they have a better oversight over the material decision. Additionally, the circular points out the importance of technology, such as Regulatory Technologies (RegTech) and Supervisory Technologies (SupTech), to further improve monitoring and compliance systems. The circular also provides that the board must approve and confirm any changes proposed to its governance and appointment policies and systems by the regulators, such that there will be no unilateral action of the board and registers, as well a greater degree of checks and balances.
New Regulations for SME IPOs
In a positive move for transparency and investor protection in the SME sector, SEBI has issued a stricter set of regulations. This will allow only financially sound and compliant listed small and medium enterprises to access the public market, as mentioned below.
Offer for Sale (OFS) Limit: In an SME IPO, the Offer for Sale portion is now capped at 20% of the entire issue size in order to restrict the promoters and existing shareholders from selling too much and ensuring that the issuer raises enough fresh capital to grow with.
Profitability and Due Diligence: SMEs must have a positive EBITDA of ₹1 crore or more in any two of the previous three financial years. This adds profitability and will allow only fundamentally sound businesses to access the public market. In addition, the Draft Red Herring Prospectus (DRHP) must now allow a public review of a minimum of 21 days to ensure transparency for investors.
Minimum Application and Allotment: To provide serious retail investor representation, the minimum lot size for retail investors has been steeply increased to a minimum of two lots (with a minimum application size of ₹2 lakh). Also, the number of allottees in a book-built issue has been raised from 50 to 200, allowing for a greater number of investors to be represented.
Other Key Reforms
SEBI has implemented several other notable reforms besides the ones highlighted above:
T+3 Listing Timeline: The IPO listing timeline has been reduced for the T+6 period to T+3, facilitating liquidity and strives to allow investors faster ability to trade their allotted shares. Further, the reduction in time increases the speed at which refunds must be processed for non-allottees which improves dynamics in the overall market, and able to reduce the time period in which funds are blocked. This IPO listing timeline became mandatory for all IPO starting on or after December 1, 2023.
ESOPs for Startup Founders: In a clear move to look after the startup ecosystem, SEBI has liberalized norms that would allow founders who are subsequently re-classified as ‘promoters’ on the record date with respect to the IPO filing may keep their employee stock option grants (ESOPs) that they received at least one year prior to the IPO filing. This is a significant relief to founders allowing them to retain their benefits post-listing and is in line with global practices providing long-term reward commitments to employees.
SWAGAT-FI Framework: The Securities Exchange Board of India (SEBI) is planning to implement a completely new framework called the “Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI)” framework. This framework would facilitate a streamlined registration and compliance process for low-risk foreign investors such as sovereign wealth funds and pension funds with the goal of more foreign money flowing into Indian markets altogether. The intention is to spur the growth of India’s sovereign debt markets by allowing easier access to larger long-term foreign capital.
REITs and InvITs: The regulator expect to declare equity status of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) which is expected to facilitate more participation and intrusion in the investor base of these instruments. This reclassification would reflect the actual economic nature of these instruments similar to their existing regulatory treatment and pave the way for these instruments to be allowed in one of the major equity indicators and consequently lead to passive investment fund inflows (such as ETF).
Conclusion
Recent regulations amendments introduced by SEBI signify a meaningful effort to bring India’s capital market regulation up to global best standards. By opening the on-ramp to listing for large corporations, improving the governance of MIIs, and making it easier for investors to exercise their rights and responsibilities, SEBI is laying the foundation for a more vibrant, transparent and competitive globally oriented capital market. While these reforms are expected to introduce new compliance obligations for participants in the capital market, they are likely to amount to an overall positive change in the growth and stability of the Indian financial landscape.
References
- “Consultation Paper on Review of Minimum Public Offer (MPO) and Minimum Public Shareholding (MPS) Requirements.” SEBI, 2025.
- “SEBI (Infrastructure Investment Trusts) (Amendment) Regulations, 2025.” SEBI, July 2025.
- “SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025.” SEBI, March 2025.
- The Economic Times. “Sebi eases compliance for govt securities investors; move to boost sovereign debt inflows.” September 10, 2025.
- “NSE and BSE Issue New Rules for SME IPOs, Effective from July 1, 2025.” July 15, 2025.
- Finlaw Consultancy. “SEBI Guidelines for SME IPO in India: Complete 2025 Overview.” July 2, 2025.
- The Economic Times. “SEBI cuts listing time to T+3 working days for public issue of debt securities.” September 26, 2024.
- Saraf and Partners. “SEBI Notifies Key Amendments to REIT and InvIT Regulations to Strengthen Governance and Increase Investment Flexibility.” July 23, 2025.
- HDFC Sky. “Sebi Cuts InvIT Allotment Lot to ₹25 Lakh, Eases Rules for REITs and Portfolio Managers.” September 11, 2025.
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