India regulator eases foreign investor entry, lowers minimum size for large IPOs

MUMBAI: India’s markets regulator on Friday made it easier for sovereign-backed and overseas retail funds to access the local markets through a single-window in a move expected to ease access for nearly two-thirds of foreign investors.

The regulator also reduced the proportion of shares large companies must sell at IPOs and simplified disclosures for low-value transactions between interconnected entities, or so-called related parties.

Indian markets have seen rising foreign outflows in recent months, pressured by steep U.S. tariffs, weak corporate earnings, and higher valuations versus peers. Foreign investors have withdrawn $11.7 billion from Indian equities and debt so far in 2025.

Through the single-window, investors perceived to be low risk will need to provide fewer documents and have lower compliance requirements.

“This initiative seeks to reduce regulatory complexity, simplify compliance and enhance India’s global competitiveness as an investor-friendly destination,” the Securities and Exchange Board of India said in a press release.

“This is just the beginning,” and a single-window clearance will be possible for other categories of foreign investors under India’s foreign exchange laws, SEBI Chairman Tuhin Kanta Pandey said at a press conference.

Overseas investors access Indian markets through multiple routes, with compliance requirements differing based on the type of investor, their structure and the assets they hold.

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Smaller size for large IPOs

The regulator lowered the proportion of shares large companies looking to list must sell to 2.5% of their share capital from 5%, provided their market capitalisation is more than 5 trillion rupees after the IPO.

This will make it easier for the market to absorb the sizeable offerings, SEBI said.

The markets regulator has been fast-tracking clearances in the world’s second-largest IPO market, which is expected to notch a record fundraise of about $20 billion in 2025.

The rule change is expected to benefit large firms looking to go public, including Reliance Jio and the National Stock Exchange of India.

SEBI also relaxed the rules for large companies to meet the 25% public float requirement.

For companies with a post-listing market capitalisation of 500 billion rupees to 1 trillion rupees, the time given to meet the public float requirement is now five years from three years earlier.

Firms with a market capitalisation of more than 1 trillion rupees ($11.3 billion) will be allowed up to 10 years to comply with the norm if their public shareholding was less than 15% at the time of listing, it said.

Connected entities

The regulator mandated that low-value transactions between interconnected entities will no longer need disclosure and that only some of the high-value deals would need shareholder approval.

It will also adopt a “scale-based” approach for shareholders’ approval for such transactions.

For listed companies with a turnover of 200 billion rupees, only related-party transactions above a threshold of 10% of the turnover would need shareholders’ approval, SEBI said.

For firms with a turnover of more than 400 billion rupees, related-party transactions worth more than 50 billion rupees will need approvals. This threshold was much lower at 10 billion rupees.