INDUSTRY
In IPO boom, SEBI’s ban on pre-offer placements disappoints mutual funds
- IBJ Bureau
- Oct 25, 2025
The SEBI has told mutual fund managers that they cannot invest in companies before they list.
Certain mutual funds had sought clarifications from the markets regulator as to whether pre-initial public offer placements qualified as eligible investments. But the regulator had said that only investments during the official IPO process were allowed, including large, early-stage anchor investments.
Companies are set to raise a record $18.5 billion this year, making India the third-largest country globally in terms of funds raised via first-time listings.
A pre-IPO placement is a private sale of shares to select investors before the company officially launches its listing. In India, alternative investment funds and foreign investors are typically allowed to buy these shares.
Mutual funds manage Rs 75.61 lakh crore of funds and are mostly targeted at retail investors.
Fund houses facing pressures to generate returns were hoping to invest in pre-IPO placements. But this clarification puts those hopes to rest.
The regulator has communicated its concern to fund houses that if they invest in a pre-IPO placement and the company ends up not listing for some reason, they then will end up holding unlisted shares.
Mutual funds are not permitted to hold unlisted shares.
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