Equity Capital Markets

The webinar, ‘Investing in India – Equity Capital Markets, hosted by Khaitan & Co, provided foreign investors and their advisors a practical and strategic overview of India's equity capital markets from a foreign investor's perspective, covering investment routes, regulatory frameworks, tax considerations, and recent reforms.

The session was moderated by Sudhir Bassi, Executive Director, Capital Market practice group and led by Abhimanyu Bhattacharya, Partner, Capital Markets Practice Group.

Please see below a summary of the key points discussed in the webinar. Views expressed in the webinar are those of individual panel members and not those of Khaitan & Co. and are subject to the disclaimer set out in the webinar recording.

The recording of the session can be viewed here:  Equity Capital Markets | Investing in India

Market Structure & “Why India, Why Now?”: The structural growth of Indian capital markets is underscored by several macro and demographic indicators:

• Economic & Demographic Resilience: Driven by a projected real GDP growth rate of 6.5% and a significant demographic dividend, with 68% of the Indian population under the age of 35.
• Domestic Capital Inflows: High household financialization is reflected in retail systematic investment plans (SIPs) averaging nearly USD 2.92 billion monthly, supported by over 170 million active Demat accounts.
• Global Competitiveness: India’s primary markets have seen record-breaking activity (over USD 18 billion aggregated in IPOs in 2025, with a projected pipeline exceeding USD 20 billion). Furthermore, the domestic exchanges (Bombay Stock Exchange and National Stock Exchange of India) have transitioned to a T+1 settlement cycle and are beta-testing T+0, placing India’s market infrastructure among the most advanced globally.

Regulatory Framework and Foreign Investment Routes: A sound understanding of India’s multi-regulator matrix—spanning Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Ministry of Corporate Affairs, the newly established International Financial Services Centres Authority at GIFT City, and the Income Tax Department—is essential for foreign participants.

• Foreign Portfolio Investment (FPI): The default route for institutional capital in listed equities. Investments are strictly capped at less than 10% per company.
• Foreign Direct Investment (FDI): Applicable to investments of 10% or more in a listed company or any foreign investment in an unlisted private company. It is geared towards strategic stakes and is governed by strict sectoral caps, pricing guidelines, and lock-in reporting requirements.
• Alternative Vehicles: Increasing foreign participation is also being structured through REITs and InvITs, offering robust public avenues for real estate and infrastructure monetization.

The Public Offering Process and Book Building Mechanics Navigating an Indian IPO is typically a 9-to-12-month journey characterized by rigorous due diligence and deep regulatory scrutiny:

• Timeline Milestones: The process involves the appointment of Book Running Lead Managers (underwriters), a 3-to-4-month diligence phase across legal, financial, and operational verticals, filing the Draft Red Herring Prospectus (DRHP), an iterative observation cycle with SEBI and the stock exchanges, and finally, listing on a rapid T+3 timeline.
• Allocation & Anchor Books: For profitable companies, up to 50% of the offer is reserved for Qualified Institutional Buyers (QIBs). Up to 60% of this QIB portion can be allocated on a discretionary basis to Anchor Investors one day prior to the issue opening, subject to 30-day and 90-day lock-in periods. Non-profitable issuers face a stricter regime, requiring a mandatory 75% allotment to QIBs for the issue to succeed.
• Promoter Identification: Indian corporate law places significant accountability on “promoters” (controlling shareholders/entities), who bear civil and criminal prospectus liability and must maintain a 20% minimum post-IPO lock-in (“skin in the game”) for 18 months to 3 years.

Post-Listing Avenues & Execution Considerations For investors seeking exposure outside of an IPO, several post-listing mechanisms are available:

• Secondary Offerings: Qualified Institutions Placements (QIPs) allow listed entities to raise institutional capital efficiently (typically via a 6-week timeline).
• Block & Bulk Deals: Block trades offer counterparty certainty within specified pricing caps (+/- 3%) during dedicated daily windows. Bulk deals offer no price caps but carry counterparty leakage risks.
• Streamlined Rights Issues: SEBI has heavily compressed the timeline for rights issues to 23 working days end-to-end, removing the requirement to file a draft letter with the regulator.

Key Insights from the Q&A Session:

• Building FPI Positions: Securing meaningful allocations in heavily oversubscribed mid-cap IPOs can be challenging. Foreign investors often leverage Pre-IPO placements, Anchor Book allocations, or secondary market accumulation within the first 30–90 days post-listing as retail investors book early profits and exit.
• Regulatory Agility: SEBI continues to implement progressive, ease-of-doing-business reforms. Notably, the minimum public float requirement for mega-cap companies (USD 12B–60B+) has been recalibrated to 2.5%–2.75%, smoothing the path for large unlisted domestic issuers. Additionally, the new “Swagat FI” framework (effective June 2026) provides a fast-tracked, low-friction 10-year registration regime for trusted sovereign and institutional investors.
• Disclosure Standards and Recourse: Indian DRHPs (often 400–600 pages) lean towards extreme comprehensiveness compared to the US S-1 or UK prospectus. Backed by underwriter due diligence certificates and statutory promoter liability, these documents provide highly vetted, legally actionable disclosures for investors including QIBs and Anchor Investors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

The content of this document does not necessarily reflect the views / position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up, please contact Khaitan & Co at editors@khaitanco.com.