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SEBI has proposed major changes to IPO rules for very large companies, aiming to ease the burden of immediate share dilution and encourage listings in India. The regulator suggests reducing the retail allocation in large IPOs and extending timelines to meet minimum public shareholding. Proposed rules vary by company size, with detailed requirements for different market capitalization bands. The changes allow companies to list with smaller IPOs initially, gradually increasing public shareholding over time. Public comments are open until early September, reflecting SEBI's consultative approach to reforming IPO norms.
Markets regulator SEBI has suggested easing the minimum public offer norms for extremely large companies and extending the timeline for meeting public shareholding requirements. The regulator has also proposed reducing the retail allocation in IPOs from 35 per cent to 25 per cent for issues exceeding INR 5,000 crore, citing challenges faced by companies in executing such large offerings. Advertisement
According to SEBI's consultation paper, the proposed framework aims to lower the immediate dilution pressure while still allowing companies to gradually comply with public shareholding norms. This approach is expected to support very large IPOs, where offering significant stakes immediately often overwhelms the market's capacity to absorb shares. SEBI noted that such changes may make India a more attractive listing destination for large issuers.
Under the proposed rules, companies with a market capitalization between INR 50,000 crore and INR 1 lakh crore will have to meet a minimum public offer of INR 1,000 crore or at least 8 per cent of post-issue capital, with a minimum public shareholding of 25 per cent achievable within five years. Companies valued between INR 1 lakh crore and INR 5 lakh crore would need an MPO of INR 6,250 crore or 2.75 per cent of post-issue capital. If their public shareholding is below 15 per cent at listing, it must rise to 15 per cent within five years and 25 per cent within ten years. Those already at or above 15 per cent would reach 25 per cent within five years.
For companies exceeding INR 5 lakh crore in market capitalization, the proposed MPO is INR 15,000 crore or at least 1 per cent of post-issue capital, subject to a minimum dilution of 2.5 per cent. Public shareholding below 15 per cent at listing would need to reach 15 per cent within five years and 25 per cent within ten years, while companies already above 15 per cent must achieve 25 per cent within five years. This allows companies to list with smaller IPOs initially, gradually increasing public shareholding and reducing immediate equity dilution pressure.
Currently, smaller companies with a market capitalization up to INR 1,600 crore must list with 25 per cent public shareholding, while medium-sized companies with a market cap between INR 1,600 crore and INR 1 lakh crore can opt for a lower MPO of 10?25 per cent, reaching 25 per cent public shareholding within three to five years. Very large companies above INR 1 lakh crore presently must raise INR 5,000 crore or at least 5 per cent in their IPO, achieving 10 per cent public shareholding in two years and 25 per cent within five years.
SEBI has invited public comments on the proposals until early September, signaling a potential shift in IPO regulations that could significantly impact the approach of large companies toward raising capital in India.
Source PTI
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