SEBI Plans to Restructure Large IPO Allotment – Retail Quota May Be Reduced
In a major development aimed at streamlining large public issues, SEBI has proposed significant changes to the IPO allotment structure, particularly for companies raising ₹5,000 crore or more.
Key Highlights of the Proposal
- Retail Quota May Be Cut to 25%: Currently, retail investors are allotted 35% of an IPO. The new proposal suggests reducing this to 25% for large IPOs.
- QIB Quota to Be Increased: The share for Qualified Institutional Buyers (QIBs) may be raised from 50% to 60%, ensuring stronger participation from financial institutions.
- Anchor Investor Category to Expand: The proposal suggests allowing insurance companies and pension funds to participate as anchor investors, in addition to mutual funds.
Why This Move?
The key reason behind this restructuring is the weak response from retail investors in large-sized IPOs. To fully subscribe a ₹5,000 crore IPO, around 7 to 8 lakh retail applications are required, which often becomes a challenge in volatile market conditions. A low subscription rate in the retail segment affects the IPO’s overall performance and market sentiment.
By increasing institutional participation, SEBI aims to:
- Strengthen the demand base
- Reduce volatility during IPO launch
- Ensure more predictable and stable pricing
Expected Impact on the Market
| Category | Impact Overview |
|---|---|
| Retail Investors | Lesser quota may reduce allotment chances in big IPOs |
| Institutional Investors | Bigger stake ensures better control and stronger involvement |
| Anchor Investors | Entry of insurers and pension funds adds credibility |
| Overall Sentiment | Higher QIB demand may boost IPO stability and listing success |
Final Thought
If implemented, these changes will significantly alter the IPO landscape for large issues. While it may reduce opportunities for retail investors, the increased institutional confidence can enhance the overall efficiency and success of large IPOs. For smaller investors, this also means focusing on quality issues where demand is better balanced across all categories.
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