SEBI Eases IPO, Minimum Public Shareholding Norms For Large Companies

In a bid to ease the listing process for large companies, markets regulator SEBI has revised minimum public shareholding (MPS) norms for companies with a post-issue market capitalisation (m-cap) of over INR 50,000 Cr. 

While the public officer and MPS will remain unchanged for companies with a post-issue m-cap of less than INR 50,000 Cr, SEBI’s board approved the following changes for companies with higher m-cap: 

— M-cap Above INR 5 Lakh Cr: These companies will need to have a minimum public offer (MPO) of INR 15,000 Cr and at least 1% of their post-issue m-cap, subject to a minimum dilution of 2.5%. They will need to achieve 15% MPS within 5 years of listing and 25% within 10 years. 

— M-Cap In The Range Of INR 1-5 Lakh Cr: The MPO size has been revised to INR 6,250 Cr and at least 2.75% of the post-issue m-cap from INR 5,000 Cr and 5% m-cap earlier. They will need MPS of 15% within 5 years of listing and 25% within 10 years.

— M-Cap In The Range Of INR 50,000 Cr To INR 1 Lakh Cr: The MPO size has been revised to INR 1,000 Cr and at least 8% of the post-issue m-cap from 10% earlier. They will need to have an MPS of 25% within 5 years of listing.

Citing its rationale for the changes, SEBI said that diluting substantial stake through an IPO can pose challenges for large issuers as the market may not be able to absorb such a large supply of shares, which in turn may discourage such issuers from pursuing listing in India. The regulator said that the revised MPO sizes are still large enough to provide sufficient stock to the market, including retail investors, and facilitate liquidity.

This comes two weeks after Reliance announced its plans to undertake an IPO of its telecom business Reliance Jio Infocomm. Earlier, Reliance was reported to be in informal discussions with SEBI to seek approval for selling a 5% stake in the telecom major’s IPO.

The conglomerate was said to be seeking the relaxations because it believes that the Indian market does not have the depth to absorb such a large listing. 

Notably, analysts and media reports in the past have said that Reliance Jio’s m-cap can be higher than $100 Bn (about INR 8.83 Lakh Cr).

During its meeting yesterday, SEBI’s board also revised rules for anchor investor allocations. In this, anchor investor allocation categories have been merged into one to allow more flexibility for large investments (up to INR 250 Cr) and increasing the number of permissible anchor investors based on allocation size.

Additionally, insurance companies and pension funds have now been included in the reserved anchor investor category, alongside domestic mutual funds. The overall anchor reservation has been increased from one-third to 40% of the public offer, with one-third still reserved for mutual funds and the rest for insurers and pension funds. 

These reforms are aimed at allowing greater participation from long-term institutional investors, including large FPIs managing multiple funds and helping create more stable and credible anchor books aligned with global best practices. Notably, SEBI has also decided not to reduce the retail investor quota in large IPOs or increase the QIB quota.