India's markets regulator on Thursday proposed changes to the structure of large initial public offerings, including increasing the allocation limit for institutional buyers and reducing the share reserved for retail investors.
The proposals come amid a surge in IPO activity in India. The Securities and Exchange Board of India (SEBI) noted that while average IPO sizes have been increasing, direct retail participation has remained flat over the past three years.
For large public issues, retail subscription levels have been particularly muted, the regulator said.
In a consultation paper published on its website, SEBI proposed that for IPOs exceeding 50 billion rupees ($571 million), the retail investor allocation may be reduced to 25% from the current 35%, while the allocation for institutional buyers may be increased from 50% to 60% in a graded manner.
The regulator also proposed increasing the number of permissible anchor investor allottees for allocations above 2.5 billion rupees, aiming to ease participation for large foreign portfolio investors managing multiple funds.
Additionally, SEBI suggested including insurance companies and pension funds in the reserved category of the anchor investor portion, alongside mutual funds.
It proposed raising the reservation for life insurers, pension funds, and domestic mutual funds from 30% to 40% of the anchor investor portion - of which one-third would remain reserved for domestic mutual funds, while 7% would be set aside for insurance companies and pension funds.
SEBI has invited public comments on the proposals until August 21.
