Sebi eases norms for foreign investors, IPOs

MUMBAI: Sebi on Friday unveiled reforms easing minimum dilution norms for IPO-bound companies, and creating a single-window system for low-risk foreign investors like sovereign wealth funds, central banks, and retail funds, eliminating repeated paperwork.

The relaxation comes amid rising foreign outflows, driven by steep US tariffs, weak earnings and rich valuations. Overseas investors have withdrawn $11.7 billion from Indian stocks and debt in 2025.

It also tightened governance at stock exchanges by mandating two executive directors, splitting critical-operations (trading, clearing, settlement) and regulatory-compliance (risk, investor grievances) roles.

For issuers with a market cap of Rs 1-5 lakh crore, the minimum public offer has been raised to Rs 6,250 crore and at least 2.8% of post-issue market cap, compared with Rs 5,000 crore and 5% earlier. Companies listing with less than 15% public float will now have 10 years to meet the 25% minimum public shareholding requirement, while those starting with 15% or more will get 5 years. The relaxed timelines, once notified by govt, will also apply to firms yet to comply under existing rules.

Anchor investor rules have been liberalised. The overall quota has gone up to 40% from one-third, with life insurers and pension funds having a share in the reserved pool. One-third will remain earmarked for mutual funds, and any shortfall in subscriptions from insurers and pension funds will revert to them. The number of permissible anchor investors has also been expanded, with a minimum allotment size of Rs 5 crore.

To make India more attractive for overseas capital, Sebi approved the Swagat-FI framework that gives "trusted" foreign portfolio and venture investors - such as sovereign funds, central banks and regulated retail funds - single-window access with a 10-year registration and KYC cycle, against 3 years. They will also be exempt from the 50% aggregate contribution cap on NRIs, OCIs and resident Indians. Complementing this, Sebi and market infrastructure institutions launched the India Market Access portal to provide step-by-step guidance on FPI registration, documentation and compliance.

In the mutual fund space, the regulator reduced the maximum exit load to 3% from 5% and revised distributor incentives to encourage inflows from smaller cities and women investors. Distributors can earn up to 1% of the first application amount or Rs 2,000 for new investors from beyond the top 30 cities, while additional commissions will be paid for onboarding new women investors.

Sebi has simplified regulations for related-party transactions, introducing a scale-based approach for shareholder approval. High-value deals now require a vote, while low-value transactions are exempt from disclosure. For companies with a turnover of Rs 20,000 crore, approval is needed for transactions exceeding 10% of turnover. The threshold for firms with a turnover over Rs 40,000 crore has been raised significantly from Rs 1,000 crore to Rs 5,000 crore.