SEBI’s September Shake-Up: 10 Market Reforms That Will Reshape Indian Investing

The Securities and Exchange Board of India (SEBI) recently unveiled a series of reforms in its board meeting. These changes are intended to make India’s capital markets more accessible, more transparent, and more friendly to both domestic and foreign investors. For everyday investors, whether those doing mutual funds, initial public offerings (IPOs), or simply choosing where to park savings, these reforms could change how they invest, how much regulation they see, and how quickly companies can list. For companies, the changes ease some compliance burdens but also introduce new norms to ensure better governance.

Minutes from the SEBI Board Meeting

Here are some major announcements from the SEBI board meeting:

• MPS Timeline Extension

SEBI has revised its Minimum Public Shareholding (MPS) and Minimum Public Offer (MPO) norms to ease listing requirements for large companies. Firms with market capitalisation between ₹50,000 crore and ₹1,00,000 crore now have 5 years to meet the 25% MPS threshold, up from the earlier 3-year timeline.

For entities exceeding ₹5 lakh crore in market cap, the compliance period is split: if public shareholding at listing is below 15%, they get 5 years to reach 15% and 10 years to reach 25%; if it's already 15% or more, the 25% target must be met within 5 years.

Additionally, such mega-cap companies must meet an MPO requirement of ₹15,000 crore plus 1% of post-issue market cap, provided that the company meets minimum dilution of 2.5%, while mid-tier firms in the ₹50,000–₹1,00,000 crore range must meet ₹1,000 crore or 8%. These reforms aim to reduce pressure on large IPOs, enable phased equity dilution, improve price discovery, and reduce volatility in primary markets.

• Anchor Investor Allocation Revamp

SEBI has revised anchor investor norms to deepen institutional participation. For IPOs up to ₹250 crore, the number of anchor investors is now set between 5 and 15. For every additional ₹250 crore, up to 15 more anchors are permitted. The domestic anchor allocation has increased from 33% to 40%, with the additional 7% exclusively reserved for Life Insurance Corporation (LIC) and pension funds. This change strengthens the long-term investor base and aligns Indian IPO practices with global benchmarks, enhancing stability and reducing speculative churn in anchor books.

• SWAGAT-FI Framework for Trusted Foreign Investors

SEBI introduced the Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) to simplify entry for low-risk foreign entities. Sovereign wealth funds, pension funds, and central banks can now register as both Foreign Portfolio Investors (FPIs) and Foreign Venture Capital Investors (FVCIs) through a unified process. They are allowed to operate via a single demat account across investment routes. This reform reduces onboarding time by 40% and compliance costs by 25%, facilitating long-term capital inflows and enhancing India’s attractiveness as a global investment destination.

• Mutual Fund Access to REITs and InvITs

SEBI has reclassified Real Estate Investment Trusts (REITs) as equity schemes and Infrastructure Investment Trusts (InvITs) as hybrid schemes within mutual fund categories. This move aligns with global fund classification norms and enables broader retail and institutional participation. This reform enhances diversification, improves yield access, and supports infrastructure monetisation goals under the National Infrastructure Pipeline.

• Accredited Investor-Based AIF Plans

SEBI has permitted Alternative Investment Funds (AIFs) in International Financial Services Centres (IFSCs) with resident Indian sponsors to register as FPIs. Additionally, it introduced Accredited Investor (AI)-only AIF plans with reduced compliance. These plans require a minimum investment of ₹10 crore per investor and are exempt from standard valuation and audit cycles. This reform targets ultra-HNI and institutional capital, streamlining fund structures and reducing regulatory friction for sophisticated investors.

• Revised Distributor Incentives

Distributor incentives will now be offered only for onboarding new individual investors (fresh PAN) from B-30 cities, capped at 1% of the first investment or total Systematic Investment Plans (SIPs) in the first year, with a ₹2,000 ceiling per investor. A parallel incentive applies for onboarding new women investors.

• IPO Allocation Stability Measures

SEBI has scrapped the proposal to reduce the retail quota from 35% to 25% and dropped the plan to increase Qualified Institutional Buyer (QIB) allocation to 60%. This preserves retail investor access while maintaining institutional balance. Additionally, SEBI mandated that anchor investors must hold their allocation for a minimum of 30 days post-listing, up from 15 days earlier. This change reduces post-IPO volatility and ensures more stable price formation.

• Enhanced Disclosure for ESG Ratings

SEBI has mandated that environmental, social, and governance (ESG) rating providers disclose methodology, weightage, and conflict-of-interest safeguards.

All listed companies in the top 1,000 by market cap must now publish ESG scores from at least two SEBI-accredited agencies starting Q4 FY 2025–26. The ESG rating must include sectoral benchmarks and peer comparisons.

• Exit Load Rationalisation in Mutual Funds

SEBI reduced the maximum permissible exit load on mutual fund schemes from 5% to 3%. Exit load is a fee charged when investors redeem units or switch schemes within a specified holding period. The revision aligns regulatory limits with prevailing industry practice, where most schemes charge between 1% and 2%. This move aims to enhance investor protection, reduce premature exit penalties, and promote long-term participation.

Additionally, SEBI clarified that exit loads are subject to 18% GST as per Central Board of Indirect Taxes and Customs (CBIC) norms.

• Governance Tightening in MIIs

SEBI has mandated that all Market Infrastructure Institutions (MIIs), including stock exchanges, depositories, and clearing corporations, must rotate key management personnel every 5 years. Independent directors must constitute at least 60% of the board, up from 50%. Additionally, MIIs must publish quarterly governance scorecards audited by SEBI-accredited agencies.

Conclusion

For stock market investors, SEBI’s September 2025 reforms are a game-changer. They aim to make the Indian market more transparent, accessible, and globally competitive. Post reforms, large IPOs will now see phased equity dilution, reducing volatility and allowing better price discovery.

The revamped anchor investor rules, particularly with increased involvement from Life Insurance Corporation (LIC) and pension funds, will bring stability and reduce speculative churn. Retail investors benefit too, as their IPO quota remains unchanged, and mutual funds can now invest in REITs and InvITs, opening up new diversification avenues.

Lower exit loads on mutual funds encourage long-term participation with fewer penalties. Also, global investors, especially sovereign and pension funds, gain smoother entry via SWAGAT-FI, strengthening India’s appeal as an investment hub.

Also Read:

SEBI Annual Report 2025: Cleaner Markets, Deeper Liquidity, and What It Means for You

SEBI’s Push to Empower Resident Indians in the FPI Ecosystem

Sources

SEBI
India Today
IPO Central
Finnovate
TaxGuru
Outlook Money
CNBC TV18