Markets regulator SEBI has prohibited mutual funds from investing in pre-IPO (initial public offering) share placements, while permitting investments in anchor rounds to enhance liquidity and valuation transparency for companies launching initial share sales, a source disclosed on Friday.
This directive aims to improve market conditions and transparency for firms entering the public domain. “We have asked mutual fund schemes not to invest in pre-IPO placement of shares but to invest in anchor rounds,” the source noted.
Earlier this month, SEBI amended its regulations governing share allocation for anchor investors in maiden public offerings, a strategic move designed to increase participation among domestic institutional investors, including mutual funds, insurance companies, and pension funds.
Under the revised framework, the total reservation in the anchor portion of IPOs has been raised from 33% to 40%. Of this, 33% is allocated to mutual funds, while the remaining 7% is designated for insurers and pension funds. Should the 7% allocation for insurers and pension funds remain unsubscribed, it will be redistributed to mutual funds.
Additionally, the source indicated that SEBI plans to substitute the mandatory abridged prospectus in IPOs with a standardized “offer document summary,” aiming to make disclosures more accessible for investors. The regulator has expressed concern that current abridged prospectuses are excessively lengthy, which may discourage retail investors from engaging with the material.
Regarding derivative trading, the source highlighted that “irrational exuberance” among certain retail investors is contributing to financial losses.
Published on November 21, 2025.
