Sebi mulls relaxing minimum public offer size for large cos, retains retail quota of 35% in IPO

New Delhi: Capital markets regulator Sebi on Monday proposed relaxing the minimum public offer (MPO) requirements for very large companies, while also extending the timelines for them to meet minimum public shareholding norms.

The proposed framework, if implemented, aims to ease the immediate dilution burden on issuers, while still ensuring gradual compliance with public shareholding requirements.

As part of this approach, Sebi has suggested retaining the retail quota at 35 per cent, in line with the existing regulations. Instead of reducing retail participation, the regulator is looking to address issuer concerns by amending rules related to minimum public offer thresholds.

This marks a shift from its earlier consultation paper, issued on July 31, which had proposed cutting the retail quota for IPOs above Rs 5,000 crore from 35 per cent to 25 per cent, citing difficulties faced by issuers in managing large issues.

In its consultation paper, Sebi noted that very large issuers often struggle to dilute substantial stakes through an IPO, as the market may not be able to absorb such a large supply of shares. The proposed framework, therefore, is aimed at making Indian listings more feasible for such companies. Currently, large companies are required to offer a higher percentage of their shareholding to the public upfront, which often results in massive IPO sizes.

Under the proposed rules, however, instead of adhering to a fixed high percentage, large issuers will have the flexibility to start with smaller IPOs and gradually meet shareholding requirements over a longer period.

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

For those 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 post-issue capital. In such cases, if public shareholding at the time of listing is below 15 per cent, it should be raised to 15 per cent within five years and 25 per cent within 10 years. However, if public shareholding is already 15 per cent or more at listing, the 25 per cent threshold should be met within five years.

In the case of companies valued at over 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 this case too, issuers with less than 15 per cent public shareholding at listing will be given up to 10 years to reach the 25 per cent mark, while those already above 15 per cent will need to achieve the same within five years.