I have a piece with Navneeta Shankar and Yash Vardhan discussing the outcomes of the recent SEBI board meeting on various topics in today's Financial Express.
The Securities and Exchange Board of India (SEBI) has long been tasked with walking a careful line between deepening capital markets and protecting investor confidence. Over the past decade, its approach has gradually shifted from a prescriptive, one-size-fits-all rules toward scale-based, proportional regulation and digital facilitation. The decisions announced by SEBI at its board meeting held on September 12, 2025, reflect this evolution. The measures range from easing IPO norms for large issuers to recalibrating related party transaction (RPT) thresholds, streamlining foreign investor access, and broadening mutual fund participation in alternative asset classes. Taken together, they signal a regulator conscious of market realities and willing to fine-tune compliance without diluting oversight.
One of the most consequential reforms is the proposed amendment to the Securities Contracts (Regulation) Rules, 1957 relating to the minimum public offer and minimum public shareholding requirements for large issuers. Under the revised framework, issuers with a post-issue market cap between Rs. 50,000 crore and Rs. 1,00,000 crore may list with a public float as low as 8% (subject to a floor of Rs. 1,000 crore), while those above Rs. 5,00,000 crore may list with just 1% public offer (subject to a minimum dilution of 2.5% and a floor of Rs. 15,000 crore). Timelines for achieving 25% public shareholding have also been extended, up to 10 years for the largest issuers.
This bifurcation of thresholds represents a more calibrated approach to different issuer sizes. Forcing very large companies to dilute aggressively at listing could result in oversupply, weak valuations, and potential instability. The revised norms ease compliance while still maintaining significant market float over time. A balance must be struck between accommodating market absorption capacity and preserving genuine public participation.
In parallel, SEBI has amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, to broaden anchor investor participation in IPOs. Previously divided into two categories based on allocation size, anchor investors will now form a single class with participation rules tied to issue size. The anchor portion has been raised to 40% of the institutional book, with one-third reserved for domestic mutual funds and the remainder for insurers and pension funds. Undersubscription in the insurer and pension fund tranche can be reallocated to mutual funds.
These changes are expected to diversify anchor books and provide structured opportunities for long-term institutional investors. Broader participation by foreign portfolio investors (FPIs) operating multiple funds also becomes easier, aligning India with global practices. While such reservations improve stability and credibility in the anchor book, the regulator must ensure they do not restrict issuer flexibility. Expanding the overall pool of eligible institutions may achieve the same objective without rigid segmentation.
Corporate governance remains another focal point. Amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, introduce scale-based thresholds for determining material RPTs. Instead of a flat numerical test, thresholds are now linked to company turnover, with higher bands for companies with turnover exceeding Rs. 20,000 crore and Rs. 40,000 crore. Subsidiary-level thresholds have also been harmonized with parent-level requirements to avoid arbitrage.
This shift toward proportionality is welcome, as fixed numerical triggers were arbitrary and often disproportionate. By tailoring thresholds to entity size, the framework becomes more rational. At the same time, audit committees must retain discretion to examine transactions beyond mere numbers, as governance risks often lie in qualitative context. Codifying omnibus approval validity periods and clarifying that a “holding company” means only a listed holding company also introduces consistency in industry practices and removes existing ambiguities.
Other decisions taken at the board meeting are reflective of SEBI’s effort to make it easier to do business in the securities markets by simplifying compliance and reducing procedures for participants. For instance, the introduction of the SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework is designed to unify and streamline access for objectively identified low-risk foreign investors such as sovereign wealth funds, pension funds, and regulated retail funds. By offering benefits such as 10-year registration validity, exemptions from certain ownership restrictions, and simplified demat account structures, the framework reduces regulatory complexity while signalling India’s intent to attract stable, long-horizon capital.
Domestically, SEBI has broadened the scope for accredited investors and large value funds in the alternative investment space. Accredited investor-only schemes will enjoy flexibility on pari-passu treatment and tenure, while the threshold for large value funds has been reduced from Rs. 70 crore to Rs. 25 crore. These reforms recognize the sophistication of accredited investors and expand the potential investor base, though regulators must monitor whether such relaxations are used disproportionately by funds seeking to avoid standard compliance.
Perhaps the most significant reform is the reclassification of Real Estate Investment Trusts (REITs) as equity instruments for mutual fund investment purposes. Until now, both REITs and Infrastructure Investment Funds (InvITs) were treated as hybrid instruments. With the new classification, REITs will fall within equity allocation limits and become eligible for index inclusion, unlocking passive flows and lowering the cost of capital for real estate developers. This is aligned with global practice, where REITs are integrated into equity markets.
Investor protection and financial inclusion were addressed through mutual fund reforms. Exit load caps have been reduced from 5% to 3%, distributor incentives have been revised to encourage inflows from beyond the top 30 cities (B-30 cities), and a new incentive has been introduced for onboarding women investors. These measures, though incremental, reflect a regulatory intent to democratize access to financial products and support underrepresented segments of the investor base.
SEBI has also cleared governance reforms for MIIs, requiring two executive directors in addition to the managing director, with defined roles in operations, compliance, risk, and investor grievances. While aimed at enhancing accountability, rigid role definitions may limit flexibility and a board-approved governance framework could have achieved the objective without such constraints. To SEBI’s credit, it did not bring about the most drastic changes that it had previously proposed by way of consultation paper.
Viewed in totality, SEBI’s decisions at its latest board meeting reflect a regulator that is increasingly pragmatic, adopting differentiated rules for different categories of issuers and investors, promoting digital facilitation, and seeking to harmonize with global standards. The reforms address both ends of the spectrum – mega issuers accessing public markets and small retail investors from B-30 cities.
Yet, execution will determine credibility. As India’s capital markets continue to expand in depth and global relevance, SEBI’s role will be to maintain this delicate balance – between growth and oversight; facilitation and vigilance. The task now is to ensure that facilitation does not outpace vigilance, and that in seeking to open doors, the regulator does not lower guardrails. Over a longer period of time, many of the details should be simplified from today’s positions.
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