India’s capital market is continuously evolving, with regulatory changes aimed at making the fund-raising process more flexible and efficient for companies. In recent times, increased market volatility and global uncertainties have made it challenging for companies to maintain their IPO sizes as planned. In such an environment, the regulator, SEBI, has provided an important relief. This step is particularly significant for companies looking to adjust their fund-raising plans in response to changing market conditions.
Let us understand in detail why this change is important and what impact it can have on investors and companies.
What’s Happening?
SEBI has relaxed IPO rules, allowing companies to make changes of up to 50% in the size of their fresh issue without needing to file a fresh Draft Red Herring Prospectus (DRHP). Under the existing rules, if a company wanted to make a change of more than 20% in the size of its fresh issue, it had to withdraw the earlier documents and refile them with SEBI.
This decision comes in the backdrop of rising geopolitical tensions, including those between Iran and Israel, along with a broader decline in global markets, both of which have impacted investor sentiment. Under the new rule, companies can increase or reduce the total issue size of their IPO by up to 50%, provided they have already received final approval from SEBI.
Market Volatility and Six-Month Relief
SEBI has not only allowed changes in issue size but has also provided relief on timelines to help companies navigate adverse market conditions. Last week, SEBI extended relief to companies whose IPO deadlines fell between 1 April and 30 September 2026. These companies can now launch their IPOs until 30 September 2026.
This move is especially beneficial for firms whose IPO approvals were close to expiry. The extension allows companies to wait for a more favourable market window and better protect their valuations. SEBI’s flexible approach highlights its responsiveness to evolving market conditions and geopolitical risks.
Impact of Changes in IPO Rules
As per existing SEBI regulations, any change exceeding 20% in the size of a company’s fresh issue requires refiling of the draft offer document. In contrast, for Offer for Sale (OFS), the permissible change limit is already set at 50%. This makes significant adjustments to the issue structure both time-consuming and process-heavy for companies.
At the same time, IPO activity in 2026 has remained fairly strong. So far this year, 19 companies have been listed on the mainboard through IPOs, while 44 companies have entered the public market via SME IPOs. This suggests that despite a volatile environment, companies continue to tap capital markets for fund-raising.
What Does This Mean for Investors?
From an investor’s perspective, this move could bring greater stability to the IPO market. When companies are allowed to adjust issue sizes based on market demand, the chances of overpriced or undersized offerings are reduced.
A well-sized IPO improves the likelihood of healthy subscription levels and better listing performance. It also gives investors an opportunity to participate at more reasonable valuations.
Additionally, during periods of volatility, companies often delay IPO plans, limiting investment opportunities. With this flexibility, IPO activity may stabilise, offering investors a wider range of choices.
What’s Next?
While the new rules provide relief, certain conditions remain in place. Companies must ensure that the primary objective of the issue (Object of the Issue) remains unchanged, and lead managers must certify compliance with SEBI regulations. Companies will also need to seek SEBI’s approval, supported by valid reasons, for any change in issue size of up to 50%.
This relaxation will apply to IPOs opening for subscription until 30 September 2026. It gives companies greater room to manage their fund-raising plans more effectively amid ongoing market volatility.
It is also worth noting that SEBI had introduced similar relaxations in 2020 during the COVID-19 pandemic, when market uncertainty was high. This reflects the regulator’s consistent approach of adapting rules to suit changing market conditions.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
