SEBI has released a consultation paper proposing amendments to Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 (SCRR) to review Minimum Public Offer (MPO) requirements and extend Minimum Public Shareholding (MPS) timelines, particularly for very large issuers. The move is aimed at easing fund-raising, ensuring market absorption capacity, and encouraging large companies to list in India.
𝘙𝘦𝘢𝘴𝘰𝘯 𝘧𝘰𝘳 𝘳𝘦𝘷𝘪𝘦𝘸
(i) Large issuers face challenges in diluting substantial equity through IPOs, as such large offerings are often difficult for the market to absorb.
(ii) Mandating substantial equity dilution for meeting the MPS requirements, immediately after the IPO can lead to an oversupply of shares in the market
(iii) Current timelines require issuers to dilute up to 25% within 5 years, which may discourage listings in India.
(iv) Data shows that issuers which offered less than 25% to the public at IPO have public shareholder base and trading turnover levels broadly comparable to Nifty 100 companies , indicating that a lower MPO for large issuances has not adversely affected market liquidity.
𝑲𝒆𝒚 𝑷𝒓𝒐𝒑𝒐𝒔𝒂𝒍𝒔:
(i) 𝐑𝐞𝐯𝐢𝐬𝐞𝐝 𝐌𝐚𝐫𝐤𝐞𝐭 𝐂𝐚𝐩 𝐓𝐡𝐫𝐞𝐬𝐡𝐨𝐥𝐝𝐬 – bifurcating categories above ₹50,000 Cr and creating new slabs for issuers with market cap above ₹5,00,000 Cr.
(ii) 𝐑𝐞𝐥𝐚𝐱𝐚𝐭𝐢𝐨𝐧 𝐢𝐧 𝐌𝐏𝐎 – For ₹50,000–1,00,000 Cr: MPO of ₹1,000 Cr and at least 8% of post-issue capital. For ₹1,00,000–5,00,000 Cr: MPO of ₹6,250 Cr and at least 2.75%. For >₹5,00,000 Cr: MPO of ₹15,000 Cr and at least 1% (minimum dilution of 2.5%).
(iii) 𝐄𝐱𝐭𝐞𝐧𝐝𝐞𝐝 𝐓𝐢𝐦𝐞𝐥𝐢𝐧𝐞𝐬 𝐟𝐨𝐫 𝐌𝐏𝐒 – For ₹50,000–1,00,000 Cr: 25% MPS in 5 years (vs. current 3 years). For >₹1,00,000 Cr: (a) If public shareholding <15% at the time of listing, then – 15% in 5 years; and 25% in 10 years. (b) If >15%, then, 25% in 5 years.
(iv) 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐭𝐨 𝐞𝐱𝐢𝐬𝐭𝐢𝐧𝐠 𝐢𝐬𝐬𝐮𝐞𝐫𝐬 – Companies already listed but yet to achieve MPS may also benefit from extended timelines.
(v) 𝐑𝐞𝐭𝐚𝐢𝐥 𝐐𝐮𝐨𝐭𝐚 𝐑𝐞𝐭𝐚𝐢𝐧𝐞𝐝 – SEBI has clarified that the retail quota in IPOs will continue at 35% (not reduced to 25% as earlier proposed).
Public comments are invited until September 08, 2025. A copy of the Consultation Paper is enclosed.
Readers are encouraged to send their views to Regstreet Law Advisors at info@regstreetlaw.com.