Sebi mulls relaxing minimum public offer size for large cos; to trim retail quota in IPO

New Delhi, Aug 18 (PTI) Markets regulator Sebi on Monday proposed relaxing the minimum public offer requirements for very large companies, and extending the timeline for them to meet minimum public shareholding norms.

Additionally, the regulator has proposed reducing the retail quota in IPO allocations from 35 per cent to 25 per cent for IPOs exceeding Rs 5,000 crore, considering the challenges faced by issuers in executing large issues.

According to the consultation paper, the proposed framework, if implemented would, reduce the immediate dilution burden while still ensuring gradual compliance with public shareholding norms.

It is expected to help large issues, which often find it challenging to dilute substantial stakes through an IPO, as the market may not be able to absorb such a large supply of shares, Sebi said in its consultation paper.

The proposal may encourage large issuers to pursue listings in India.

Currently, such issuers are required to offer a higher percentage of their shareholding to the public, which often results in massive IPO sizes that are difficult for the market to absorb.

Under the proposed rules, instead of sticking to a fixed high percentage, large companies will be allowed to raise a lower percentage of shares.

For companies with a market capitalisation between Rs 50,000 crore and Rs 1 lakh crore, the new minimum public offer (MPO) will be Rs 1,000 crore and at least 8 per cent of the post-issue capital, with minimum public shareholding (MPS) of 25 per cent to be achieved within 5 years.

For issuers with a market capitalisation between Rs 1 lakh crore and Rs 5 lakh crore, the MPO will be Rs 6,250 crore and at least 2.75 per cent of the post-issue capital. In such cases, if public shareholding is below 15 per cent at the time of listing, it should be increased to 15 per cent within 5 years and 25 per cent within 10 years; however, if it is already 15 per cent or more at listing, then 25 per cent should be achieved within 5 years.

For companies with a market capitalisation above Rs 5 lakh crore, the proposed MPO will be Rs 15,000 crore and at least 1 per cent of post-issue capital, subject to a minimum dilution of 2.5 per cent. In these cases, if public shareholding is less than 15 per cent at listing, it must reach 15 per cent within 5 years and 25 per cent within 10 years, while issuers with at least 15 per cent public shareholding at listing must achieve 25 per cent within 5 years.

This means companies can list with smaller IPOs initially, while gradually increasing their public shareholding over a longer period, reducing the immediate burden of large-scale equity dilution.

At present, small companies with a market capitalisation of up to Rs 1,600 crore must list with 25 per cent public shareholding at the time of IPO.

For medium-sized companies with a market capitalisation between Rs 1,600 crore and Rs 1,00,000 crore, a lower MPO of 10-25 per cent is permitted, with a timeline of 3-5 years to achieve 25 per cent Minimum Public Shareholding.

In the case of very large companies with a market capitalisation above Rs 1,00,000 crore, the requirement is an MPO of Rs 5,000 crore or at least 5 per cent, with public shareholding to be raised to 10 per cent within 2 years and 25 per cent within 5 years.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposals till September 8. PTI SP SHW