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.
๐๐ฆ๐ข๐ด๐ฐ๐ฏ ๐ง๐ฐ๐ณ ๐ณ๐ฆ๐ท๐ช๐ฆ๐ธ
(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.
๐ฒ๐๐ ๐ท๐๐๐๐๐๐๐๐:
(i) ๐๐๐ฏ๐ข๐ฌ๐๐ ๐๐๐ซ๐ค๐๐ญ ๐๐๐ฉ ๐๐ก๐ซ๐๐ฌ๐ก๐จ๐ฅ๐๐ฌ โ bifurcating categories above โน50,000 Cr and creating new slabs for issuers with market cap above โน5,00,000 Cr.
(ii) ๐๐๐ฅ๐๐ฑ๐๐ญ๐ข๐จ๐ง ๐ข๐ง ๐๐๐ โ For โน50,000โ1,00,000 Cr: MPO of โน1,000 Cr and at least 8% of post-issue capital. For โน1,00,000โ5,00,000 Cr: MPO of โน6,250 Cr and at least 2.75%. For >โน5,00,000 Cr: MPO of โน15,000 Cr and at least 1% (minimum dilution of 2.5%).
(iii) ๐๐ฑ๐ญ๐๐ง๐๐๐ ๐๐ข๐ฆ๐๐ฅ๐ข๐ง๐๐ฌ ๐๐จ๐ซ ๐๐๐ โ For โน50,000โ1,00,000 Cr: 25% MPS in 5 years (vs. current 3 years). For >โน1,00,000 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) ๐๐ฉ๐ฉ๐ฅ๐ข๐๐๐๐ข๐ฅ๐ข๐ญ๐ฒ ๐ญ๐จ ๐๐ฑ๐ข๐ฌ๐ญ๐ข๐ง๐ ๐ข๐ฌ๐ฌ๐ฎ๐๐ซ๐ฌ โ Companies already listed but yet to achieve MPS may also benefit from extended timelines.
(v) ๐๐๐ญ๐๐ข๐ฅ ๐๐ฎ๐จ๐ญ๐ ๐๐๐ญ๐๐ข๐ง๐๐ โ 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.