SEBI ICDR Regulations
The SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 govern every public issuance of equity and debt securities in India, prescribing eligibility conditions, disclosure standards, allotment procedures, and post-listing obligations for issuers.
The ICDR Regulations 2018 replaced the earlier 2009 version and represent the consolidated rulebook for capital issuances in India. They cover initial public offerings (IPOs), follow-on public offerings (FPOs), rights issues, bonus issues, qualified institutional placements (QIPs), preferential allotments, and offer-for-sale (OFS) transactions.
For an IPO, the ICDR Regulations require an issuer to file a Draft Red Herring Prospectus (DRHP) with SEBI at least thirty days before the opening of the issue. SEBI reviews the document and issues observations — commonly called the 'SEBI observation letter' — which must be incorporated before a final Red Herring Prospectus (RHP) is filed with stock exchanges. The regulations specify minimum disclosure requirements covering the business description, risk factors, management discussion, capital structure, financial statements, objects of the issue, and the basis of allotment.
Eligibility criteria under ICDR include the minimum average pre-tax operating profit requirement (known as the 'profitability route') for companies seeking to list without a PE/VC sponsor. For companies that do not meet profitability thresholds, the 'QIB route' mandates that at least 75% of the net offer be allocated to Qualified Institutional Buyers. The regulations also specify lock-in periods for promoter shareholding (18 months for minimum promoter contribution, 6 months for the balance) to prevent immediate exit after listing.
The 2018 overhaul introduced tighter norms for allotment in oversubscribed issues, refined the rules for anchor investors (who must hold shares for 30 days, subsequently extended for a portion), and created a cleaner framework for OFS by existing shareholders. Subsequent amendments tightened the reservation for retail individual investors in rights issues and mandated the use of the UPI-based ASBA mechanism.
Non-compliance with ICDR norms can trigger SEBI action under Section 11, 11B, or 24 of the SEBI Act — including injunctions, refusal of listing, directions to refund subscription money, and penalties against the issuer and its directors.