Sebi Proposes Easier IPO Rules and Longer Shareholding Timelines for India’s Largest Companies
The Securities and Exchange Board of India (Sebi) has proposed relaxing minimum public offer (MPO) norms and extending timelines for achieving the 25% minimum public shareholding (MPS), aiming to make listings by very large companies smoother and less disruptive to markets.
- Three-tier MPO instead of a single 10% threshold for very large IPOs.
- Lower initial public float for mega-cap listings (as low as 2.5% with value floors).
- Longer time to reach 25% public shareholding (up to 10 years in some cases).
- Extended timelines to also cover listed firms still short of 25% MPS.
What’s Changing and Why
Sebi’s rationale is that very large flotations are difficult for the market to absorb at once. Staggering equity dilution over time can help prevent valuation pressure, while still moving companies toward wider public ownership.
Old vs Proposed Norms (At a Glance)
| Parameter | Current Rule | Proposed Rule |
|---|---|---|
| Minimum Public Offer (MPO) for very large IPOs | If post-issue market value > Rs. 1 lakh crore: at least 10% equity to be offered |
Three-tier MPO:
|
| Minimum Public Shareholding (MPS) target | 25% public shareholding within 3 years of listing |
|
| Applicability to existing listed firms below 25% MPS | Must comply within existing permitted period; non-compliance attracts action | Extended timelines to also cover firms still short of 25%, whether within time or already non-compliant |
Who Benefits
- Mega-cap issuers: Lower initial float reduces pressure on pricing and book-building.
- Investors: More stable post-listing performance as supply is staggered.
- Markets: Better absorption capacity for very large issuances.
What to Watch Next
The proposals have been submitted to the government for amending the Securities Contracts (Regulations) Rules. Final adoption will depend on notified rule changes.
Note: Amounts are expressed in Rs. and thresholds refer to post-issue market value categories as cited in the proposal.
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