The market regulator, SEBI, has prohibited mutual funds (MFs) from investing in pre-IPO placements.
This means mutual funds cannot buy shares allotted before an IPO. Now, mutual funds can participate in an IPO only as anchor investors.
For clarity:
Anchor allotments are made one day before the IPO opens to the public.
Pre-IPO placements happen months in advance, while the company is preparing to go public.
Current Rules for Mutual Funds
Under the current regulations, mutual funds are allowed to invest in listed shares or shares that are awaiting listing.
Earlier, the rules did not explicitly mention pre-IPO shares, which created confusion about whether mutual funds could invest in them.
To address this, SEBI recently sent a letter to the Association of Mutual Funds in India (AMFI). The regulator noted that:
Pre-IPO investments increase risk because mutual funds may end up holding unlisted shares.
If an IPO is delayed or cancelled, mutual funds may be stuck with unlisted shares, which goes against regulations.
Pre-IPO shares are usually bought after filing the offer document, but the IPO may still face delays or cancellations.
Pre-IPO Trends
In 2023, 13 companies raised ₹1,074 crore via pre-IPO placements.
In 2024, this fell to 8 companies raising ₹387 crore.
So far in 2025, 7 companies have raised ₹506 crore through pre-IPO investments.
