SEBI’s ban resolves the illiquidity issue; nevertheless, it also produces new market deformity which includes regulatory arbitrage towards AIFs, uneven playing field, and scarcity of domestic capital India’s startup ecosystem.

Until refinements are made, mutual funds will remain on the sidelines of the pre-IPO market, limited to anchor allocations and public issues as India’s IPO boom continues unabated—while the question of whether protection has inadvertently become exclusion remains unresolved.

SEBI’s 2025 proposals represent a significant evolution, combining empirical data, comparative insight, and statutory modernization. If adopted, these changes would foster a deeper, more diversified pool of anchor investors, strengthen the role of long-term institutions, and produce a more realistic structure for public allocation in large IPOs.