SEBI Bars Mutual Funds from Pre-IPO Investments; Anchor Round Participation Allowed

New Delhi: The Securities and Exchange Board of India (SEBI) has prohibited mutual fund companies from investing in shares before an Initial Public Offering (pre-IPO). However, these funds can participate in the anchor round of a public issue, sources confirmed on Friday.

Reason for the Move

SEBI’s decision aims to increase market liquidity and ensure greater transparency in IPO valuations. By restricting pre-IPO purchases, the regulator seeks to make the IPO process more equitable for retail and other investors.

Anchor Investor Rules Updated

Earlier this month, SEBI made significant changes to share allocation rules for anchor investors. The move was intended to boost participation of domestic institutional investors such as mutual funds, insurance companies, and pension funds. Under the revised framework, anchor investor allocation was increased from 33% to 40%, with 33% earmarked for mutual funds and the remaining 7% for insurance and pension funds. Any unallocated portion for insurance and pension funds would automatically be transferred to mutual funds.

SEBI Chairman on Other Regulatory Areas

SEBI Chairman Tuhin Kant Pandey clarified that the regulator is not considering oversight of digital gold or e-gold products, as they do not fall within SEBI’s jurisdiction.

REITs and InvITs to Join Market Indices

SEBI is also working with industry stakeholders to include REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) in market indices, a move expected to enhance liquidity in these segments. The announcement was made during the first national conclave on InvITs and REITs organized by the Bharat InvITs Association (BIA) and Indian REITs Association (IRA) in New Delhi. SEBI is also considering measures to simplify trading and investment in REITs and InvITs, making these products more accessible to investors.

What Are REITs?

REITs are companies that own and operate large real estate assets, such as malls and office buildings. They allow investors to buy stakes in high-value properties and earn returns through dividends, while potentially increasing their capital over time.