The proposed framework, if carried out, goals to ease the quick dilution burden on issuers, whereas nonetheless guaranteeing gradual compliance with public shareholding necessities.
As a part of this method, Sebi has steered retaining the retail quota at 35 per cent, in step with the prevailing laws. As an alternative of decreasing retail participation, the regulator is seeking to handle issuer issues by amending guidelines associated to minimal public provide thresholds.
This marks a shift from its earlier session paper, issued on July 31, which had proposed chopping the retail quota for IPOs above Rs 5,000 crore from 35 per cent to 25 per cent, citing difficulties confronted by issuers in managing giant points.
In its session paper, Sebi famous that very giant issuers usually wrestle to dilute substantial stakes by an IPO, because the market might not be capable of soak up such a big provide of shares.
The proposed framework, due to this fact, is aimed toward making Indian listings extra possible for such firms.At the moment, giant firms are required to supply the next proportion of their shareholding to the general public upfront, which frequently leads to huge IPO sizes. These might be troublesome for the market to soak up and will discourage firms from coming to the home market.Underneath the proposed guidelines, nevertheless, as an alternative of adhering to a set excessive proportion, giant issuers can have the pliability to begin with smaller IPOs and progressively meet shareholding necessities over an extended interval.As an example, firms with a market capitalisation between Rs 50,000 crore and Rs 1 lakh crore might want to make a minimal public provide (MPO) of not less than Rs 1,000 crore and eight per cent of post-issue capital, with the 25 per cent minimal public shareholding (MPS) goal to be achieved inside 5 years.
For these with a market capitalisation between Rs 1 lakh crore and Rs 5 lakh crore, the MPO will probably be Rs 6,250 crore and not less than 2.75 per cent of post-issue capital. In such instances, if public shareholding on the time of itemizing is under 15 per cent, it ought to be raised to fifteen per cent inside 5 years and 25 per cent inside 10 years. Nevertheless, if public shareholding is already 15 per cent or extra at itemizing, the 25 per cent threshold ought to be met inside 5 years.
Within the case of firms valued at over Rs 5 lakh crore, the proposed MPO will probably be Rs 15,000 crore and not less than 1 per cent of post-issue capital, topic to a minimal dilution of two.5 per cent. On this case too, issuers with lower than 15 per cent public shareholding at itemizing will probably be given as much as 10 years to achieve the 25 per cent mark, whereas these already above 15 per cent might want to obtain the identical inside 5 years.
Sebi identified that this staggered method would scale back the stress of large-scale dilution instantly after itemizing. It will additionally stop an “oversupply of shares out there”. This anticipation of additional dilution might impression the share costs, regardless of sturdy firm fundamentals, and will adversely impression current public shareholders.
In recent times, entities corresponding to Life Insurance coverage Company of India (LIC) and Hyundai Motor India have undertaken giant IPOs. On the similar time, IPO sizes have been rising steadily, with the typical mainboard subject rising to Rs 2,057 crore in 2024-25 from Rs 1,488 crore in 2019-20.
At the moment, companies with a market capitalisation of as much as Rs 1,600 crore should listing with 25 per cent public shareholding on the time of IPO.
Medium-sized firms, valued between Rs 1,600 crore and Rs 1,00,000 crore, are allowed a decrease MPO of 10-25 per cent, with a timeline of three to 5 years to realize the 25 per cent MPS.
In distinction, very giant firms with a market capitalisation above Rs 1 lakh crore are presently required to make an MPO of Rs 5,000 crore or not less than 5 per cent, after which increase their public shareholding to 10 per cent inside two years and 25 per cent inside 5 years.
The Securities and Trade Board of India (Sebi) has sought public feedback on the proposals until September 8.
