SEBI Allows 50% IPO Size Flex Amid Middle East Tensions

In a significant easing of capital market norms, the Securities and Exchange Board of India has permitted companies to increase or decrease their IPO size by up to 50% without requiring a fresh draft red herring prospectus (DRHP) filing, according to an email reviewed by NDTV Profit.

The move marks a sharp departure from existing rules, which allowed only a 20% variation in issue size without triggering a refiling requirement. The relaxation will be granted on a case-to-case basis and is aimed at helping issuers navigate heightened market uncertainty.

The regulator's decision comes in response to representations from the industry, highlighting challenges in raising capital amid subdued investor participation. Ongoing geopolitical tensions in the Middle East have been cited as a key factor weighing on market sentiment and affecting issuers' ability to accurately gauge demand and pricing.

The relief will apply to IPOs opening on or before Sept. 30, 2026, offering a temporary but meaningful window for companies planning to tap the markets.

However, the flexibility comes with safeguards. Issuers must ensure there is no change in the core objectives of the issue. Lead managers will be required to certify that the offer documents remain compliant with regulatory provisions. Any revisions to the issue size must be appropriately reflected through an addendum to the DRHP, which must be made public.

Further, companies seeking to revise their issue size will need to submit a formal application to SEBI, providing justification for the proposed change.

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The communication was routed through the Association of Investment Bankers of India, advising merchant bankers to take note of the relaxation while planning and executing IPO mandates.

Commenting on the developments, Manan Lahoty, head of capital markets, Cyril Amarchand Mangaldas said this allowance to rework the IPO structure reflects a development-oriented mindset from the regulator.

"It will help a number of IPO aspirants who are confident about launching but were held back by issue sizes decided in a very different market. They can now come to market with a smaller capital raise. Equally, existing investors get the option to defer their exits rather than being locked into sell-down commitments that no longer make sense in the current environment," Lahoty added.

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