Sebi, investment bankers discuss giving IPO-bound companies more room to revise issue sizes

We have discussed this with the regulator. However, there has not been any final decision yet,” one person said on condition of anonymity. Currently, a company seeking to raise capital through an IPO must file a new DRHP if the issue size changes by more than 20%, although the regulator has temporarily eased the threshold until March 2027. The threshold for an offer for sale (OFS), in which existing shareholders sell their shares, is 50%.

“AIBI has made a representation to change the 20% threshold to 50%, which would make it at par with OFS issuances. The matter was discussed 15-20 days ago with Sebi,” the second person said. In an IPO, a company issues new shares to the public to raise capital, while an OFS allows existing shareholders, including promoters and early investors, to sell their holdings to the public. AIBI's proposal seeks to reduce the regulatory burden on fresh fundraising, where changes in issue size can otherwise trigger a fresh round of documentation and scrutiny.

“If a company wants to change its issue size due to market conditions or other reasons, the window of 20% may be too thin. Valuations and pricing in an IPO may change as the company decides to go public, but every time there is a larger change, they have to go through the cumbersome process of refiling their DRHP,” the first person said. Queries emailed to Sebi and AIBI did not elicit responses at the time of publishing.

The proposed change comes as companies planning to tap the primary market navigate heightened volatility, uncertain investor appetite and fluctuating valuations. A change in market conditions between the filing of offer documents and the launch of an IPO can change the amount a company hopes to raise, making the existing threshold restrictive. “Some relaxation in the threshold is justified, particularly in a market where IPO issuers are increasingly having to navigate changing valuations, investor appetite and market conditions,” said Pranav Haldea, managing director at Prime Database.

“Requiring a fresh DRHP for a change in issue size can entail considerable time and cost, potentially forcing companies to defer their offerings. However, the relaxation should be calibrated and should not become a means for issuers to materially alter their fundraising plans without adequate justification and disclosure.” The most recent example of an IPO size-change was by Oravel Stays Ltd, the parent company of Oyo.

Oravel cut its planned fresh issue to ₹3,350 crore from ₹6,650 crore, according to an addendum to the DRHP filed with Sebi on 26 October. In August, Hero Motors trimmed its issue size to ₹1,000 crore from ₹1,200 crore. The revised IPO comprised a fresh issue of shares worth ₹600 crore, while promoters will sell shares worth ₹400 crore through an OFS. In February, Fractal Analytics reduced its IPO size by over 40% to ₹2,834 crore from ₹4,900 crore.

The Mumbai-based company became India's first listed pure-play Al company. The market regulator temporarily relaxed the threshold for fresh issues to 50% in April, due to heightened market volatility and subdued sentiment. The measure allowed companies to increase or decrease their issue size by up to 50% without triggering additional regulatory compliance requirements. The regulator extended the relaxation until March 2027, Mint reported on 13 October.

The temporary change comes with safeguards: the main object of the issue must remain unchanged and lead managers must certify that the offering complies with Sebi regulations. The responsibility for ensuring compliance rests with the lead manager handling the issue. AIBI is seeking to make this flexibility part of the broader regulatory framework rather than leave issuers dependent on a temporary relaxation.

There have been 104 issues for a combined ₹1.55 trillion so far in 2026, compared with 63 issues of ₹1.19 trillion in 2021. At the same time, the secondary market has faced downward pressure. The Nifty 50 has declined about 10% so far this year amid geopolitical tensions, elevated crude oil prices, rising global bond yields and a stronger US dollar. A weaker rupee, concerns over corporate earnings and relatively expensive valuations have added to investor caution.

Foreign portfolio investors (FPIs) have remained net sellers of Indian equities, with outflows from the equity market totalling ₹2.95 trillion so far in 2026, according to the National Securities Depository Ltd. IPOs with valid Sebi approvals originally expected to have launched before April 2027 include Oravel Stays, fintech major PhonePe Ltd, Carlsberg India Ltd, Avaada Electro Ltd and Paras Healthcare Ltd.

Sebi also extended the validity of IPO approvals to give companies more time to assess market conditions. Under a circular issued on 7 April, observation letters expiring during the period from 1 April and 30 September will remain valid until 30 September, providing issuers with a longer window to launch their offerings.