The Securities and Exchange Board of India (SEBI) has taken a big decision. Earlier, SEBI had proposed to reduce the quota of retail investors from 35% to 25% in IPO larger than Rs 5,000 crore, but now it has retreated from this decision. Meaning, 35% quota of retail investors will remain the same.
SEBI took this step in view of the problem of low participation of retail investors in large IPOs. But, now SEBI said that it will monitor the opinion of all the stakeholders on this issue and the retail quota will not change. SEBI said in one of its consultation paper that to solve the problem of retail subscription in large IPOs, it will allow companies to list with low stake. Also, the minimum public shareholding (MPS) will give more time to meet the rules.
What was SEBI’s old plan?
In the consultation paper of July 31, 2025, SEBI proposed to reduce retail quota from 35% to 25% for IPO larger than Rs 5,000 crore and to increase the quota of qualified institutional buyers (QIB) from 50% to 60%. However, investors and people involved in the market expressed strong opposition to this. He said that SEBI should focus on the price of IPO not only on retail subscription data.
SEBI’s new proposal
SEBI suggested that the participation of retail investors is increasing through mutual funds. Mutual funds already get 5% reservation in the QIB category, which indirectly represents retail investors. Now SEBI has proposed that the reservation for mutual funds in non-digested QIB category should be increased from 5% to 15%. This can compensate for a decrease in retail quota. SEBI released another consultation paper on Monday, stating that companies with Rs 50,000 crore or more market cap will be allowed to list with a low stake. Also, they will be given more time to meet MPS rules.