Mumbai: Markets regulator the Securities and Exchange Board of India (SEBI) on Monday released a consultation paper proposing easier rules for very large companies to launch their Initial Public Offerings (IPOs), including relaxed minimum public offer requirements and more time to meet public shareholding norms.
Currently, big companies are required to offer a larger portion of their shares to the public right at the time of listing. This often results in extremely large IPO sizes, which the market finds difficult to absorb. SEBI said the new framework would reduce the immediate pressure on companies to dilute their stakes, while still ensuring that they gradually comply with public shareholding rules.
As part of the changes, the market regulator has also suggested reducing the retail quota in IPOs above Rs 5,000 crore. Instead of the present 35 per cent allocation, only 25 per cent of shares would be reserved for retail investors in such large issues.
The regulator noted that issuers often struggle to manage very large IPOs, and this step will make the process smoother. Under the proposed framework, companies with a market value between Rs 50,000 crore and Rs 1 lakh crore will need to come out with a minimum public offer of Rs 1,000 crore and at least 8 per cent of their post-issue capital.
They must eventually raise their public shareholding to 25 per cent within five years. For companies valued between Rs 1 lakh crore and Rs 5 lakh crore, the minimum public offer will be Rs 6,250 crore and at least 2.75 per cent of post-issue capital.
If such a company’s public shareholding is less than 15 per cent at the time of listing, it must be raised to 15 per cent within five years and 25 per cent within 10 years. However, if they already have 15 per cent or more at the time of listing, then 25 per cent must be achieved within five years.
This means that very large companies will have the flexibility to start with smaller IPOs and then gradually increase the number of shares held by the public over a longer period. SEBI has invited public feedback on these proposals until September 8.