If you follow India’s capital markets, you know it’s a constant balancing act. On one side, you have the drive to grow, innovate, and attract big money. On the other, you have the absolute need to protect everyday investors and keep the system fair. The market regulator, SEBI, lives on this tightrope. And on September 12, 2025, it just made some of its biggest moves in years, approving a whole slate of new rules that could fundamentally change the game for companies going public, their investors, and the market as a whole.
These aren’t just minor tweaks. This is a deliberate shift in strategy, born from a recognition that India’s markets are growing up. The old one-size-fits-all rulebook was starting to feel a bit tight. So, SEBI decided it was time for a new approach, one that’s more flexible, pragmatic, and in tune with the massive scale of business in India today. Let’s break down what’s happening, why it matters, and what it means for us.
Setting the Scene: Why Fix What Wasn’t Broken?
You might be wondering, why the sudden overhaul? The truth is, the system wasn’t broken, but it was showing its age. For years, SEBI’s rules were the same for a mid-sized company as they were for a corporate behemoth. This created some serious roadblocks, especially for huge companies wanting to list on the stock exchange.
Imagine you’re a massive, family-owned conglomerate or a giant state-owned enterprise. The old rules required you to sell off a huge chunk of your company in an IPO. The market, as deep as it is, might not have the appetite to swallow that many shares at once. This reality discouraged some of India’s biggest names from even considering a domestic listing.
Even if they did list, they were on a short leash to further dilute their stake to meet public shareholding norms. This created what traders call a “price overhang”, the constant expectation that a big chunk of shares would soon be dumped on the market, which kept the stock price weighed down and hurt the very investors who had shown faith in the IPO. It was a system that, while well intentioned, was inadvertently penalizing the biggest players. SEBI saw this and decided it was time to build a more modern, flexible framework.
The New Playbook: A Breakdown of the Big Changes
SEBI’s new amendments are comprehensive, but three areas really stand out as transformative.
1. Mega IPOs Get a Fresh Set of Wings
This is the headline act. SEBI is making it significantly easier for corporate giants to go public.
- A More Realistic Path to Public Ownership: The old Minimum Public Shareholding (MPS) rules were rigid. Now, they’re smart and tiered. Take a company worth over ₹1,00,000 crore. Previously, it had to sell shares worth ₹5,000 crore and at least 5% of its value in the IPO. The new rule is more forgiving: an offering of ₹6,250 crore and just 2.75% of its market cap will do. But the real game-changer is the timeline. Instead of being rushed, these companies now have up to ten years to reach the mandatory 25% public float, depending on their initial public holding. Think of it as giving a marathon runner a staggered start and a longer, more manageable course instead of demanding a full sprint from day one. This also applies to existing listed companies that are still on their journey to meet these norms, giving everyone more breathing room.
- Bringing in the Wise Owls for IPOs: An IPO’s success often hinges on its “anchor investors”, the big institutions that commit money upfront, giving others confidence. Previously, this club was dominated by mutual funds. SEBI is now widening the circle, officially inviting
Life Insurance Companies and Pension Funds to the party. It has also increased the total pot reserved for these long-term players from one-third of the institutional quota to 40%. This isn’t just a numbers game. Insurers and pension funds are the definition of patient, long-term capital. Their presence in an IPO is a massive vote of confidence, signalling stability and quality to the rest of the market. It helps ground the IPO process in fundamentals rather than just hype.
2. A Common-Sense Fix for “Family” Business
Every listed company has to follow strict rules for “Related Party Transactions” (RPTs)—basically, any business deal done with its own promoters or their relatives. This is crucial to prevent insiders from siphoning money out of the company.
- Goodbye, One-Size-Fits-All: The old rule flagged any such deal above ₹1,000 crore as material, requiring a cumbersome shareholder vote. This sounds fine, until you realize that for a company with a turnover of ₹2,00,000 crore, a ₹1,000 crore transaction could be just another Tuesday. It was creating a lot of procedural noise. The new rule is beautifully simple it is scale-based. For a smaller company, the threshold remains a percentage of its turnover. But for a corporate giant with over ₹40,000 crore in turnover, the trigger for a shareholder vote is much higher. It’s a pragmatic shift that acknowledges materiality is relative. It allows boards to focus on genuinely significant deals instead of getting bogged down in paperwork, all while keeping the core principle of oversight intact.
3. Rolling Out the Welcome Mat for Serious Investors
SEBI is also making it easier for sophisticated, big-ticket investors to participate in India’s growth story.
- An Express Lane for a “Accredited Investors”: SEBI is creating a new class of Alternative Investment Funds (AIFs) just for Accredited Investors people and institutions who are certified as financially savvy and can handle risk. These funds will operate with more flexibility and fewer restrictions, recognizing that their investors don’t need the same level of hand-holding. In a move that will surely grab headlines, the minimum ticket size for so-called Large Value Funds (LVFs) has been slashed from ₹70 crore to just ₹25 crore. This is a clear signal that SEBI wants to unlock more risk capital and channel it into the economy.
So, What’s the Real Impact? Is It All Good News?
These reforms are designed to be a massive catalyst for the market, but like any big change, they come with both huge potential and a few things to watch out for.
The Upside: A Deeper, More Vibrant Market
Let’s be clear the MPS relaxation is a very big deal. It could be the key that unlocks the listings of several giant state-owned enterprises and private behemoths. This means more high-quality investment opportunities for everyone and a significant deepening of India’s market. The extended timelines will bring much-needed stability to newly listed stocks, protecting them from the volatility of forced selling by promoters.
The revamped anchor investor rules will add a layer of maturity and credibility to the IPO market. When you see a major pension fund putting its long-term money into a company, it sends a powerful message. This will likely lead to better price discovery and more sustainable post-listing performance. And the smarter RPT rules? They simply mean less red tape and more efficient governance for the companies that form the backbone of our economy.
The Potential Pitfalls: A Few Things to Keep an Eye On
But is there a flip side? Of course. While a smaller initial float for a mega-company still means a lot of shares are available, it also means promoters get to keep a tighter grip on control for much longer. This could potentially slow down the process of a company becoming truly public in spirit and could limit the influence of minority shareholders in the early years.
On the RPT front, while the new thresholds are logical, they do open the door for some very large transactions to go through without a shareholder vote. A deal worth nearly ₹5,000 crore is a massive amount of money by any standard. This puts a much heavier burden on independent directors and audit committees to be vigilant and act as the true guardians of shareholder interests.
SEBI knows these risks. The official communication makes it clear that stock exchanges will be keeping a close watch on these companies with their surveillance tools. This oversight will be absolutely critical to ensure that this newfound flexibility doesn’t come at the cost of transparency and fairness.
The Final Verdict: A Bold Bet on a Mature Market
So, where does this leave us? SEBI is making a bold, calculated bet on the maturity of the Indian market and its participants. It’s moving away from a rigid, top-down approach and embracing a more flexible framework that trusts companies to do the right thing—while keeping a watchful eye.
These changes are designed to make our markets more attractive, efficient, and aligned with global standards. They aim to bring India’s biggest companies into the public fold and empower our most stable, long-term investors. The real test, of course, will be in the execution. Will this usher in a new era of growth and stability, or will loopholes be exploited? Only time will tell. But for now, it feels like a significant, and necessary, step in the right direction.
(This post has been authored by Amitabh Kumar Saxena and Muskan Arora, fourth-year student at NLIU, Bhopal)
CITE AS: Amitabh Kumar Saxena and Muskan Arora , ‘SEBI’s Progressive Pivot: Balancing Market Growth with Governance in India’s Capital Markets’ (The Contemporary Law Forum, 1st december 2025) <https://tclf.in/2025/12/01/sebis-progressive-pivot-balancing-market-growth-with-governance-in-indias-capital-markets/>date of access.