The Securities and Exchange Board of India (SEBI) has proposed major changes to ease stake dilution and extend timelines for meeting the Minimum Public Shareholding (MPS) norms in large initial public offerings (IPOs).
According to a consultation paper released on Monday, SEBI suggested new thresholds and timelines based on post-issue market capitalization. This move comes after inputs from its Primary Market Advisory Committee and internal deliberations.
- For IPOs with post-issue market cap between ₹50,000 crore and ₹1,00,000 crore:
- Minimum issue size: ₹1,000 crore plus at least 8% of post-issue share capital.
- MPS of 25% to be achieved within 5 years of listing, instead of the current 3 years.
- For IPOs with market cap between ₹1,00,000 crore and ₹5,00,000 crore:
- Minimum issue size: ₹6,250 crore plus at least 2.75% of post-issue share capital.
- If public shareholding is below 15% at listing: MPS of 15% in 5 years and 25% in 10 years.
- If above 15%: 25% MPS within 5 years.
- For IPOs above ₹5,00,000 crore market cap:
- Minimum stake dilution: ₹15,000 crore plus at least 1% of post-issue capital, with a minimum of 2.5%.
- Similar extended timelines for achieving 15% and 25% public shareholding.
Why the Relaxation?
SEBI noted that mega IPOs pose challenges for both issuers and the market due to the size of stake dilution required. Large, profitable companies—especially those with strong reserves but limited capital-raising needs—often find it difficult to meet MPS requirements within the current timelines. Public Sector Undertakings (PSUs) also face compliance hurdles under existing rules.
The regulator emphasized that without such relaxations, many large corporations may hesitate to list in India, reducing opportunities for domestic investors.
Next Steps
SEBI has invited public comments on the proposals until September 8. If approved, the rules under the Securities Contracts (Regulation) Rules, 1957 (SCRR) will need amendments by the Ministry of Finance to provide flexibility to large issuers.
