admin
Last Updated:
The Securities and Exchange Board of India (SEBI) is reportedly considering a proposal to ease IPO norms for large companies
SEBI is reportedly considering a proposal to ease IPO norms for large companies
IPO Rule Change: The Securities and Exchange Board of India (SEBI) is reportedly considering a proposal to ease IPO norms for large companies, potentially allowing them to go public with smaller issue sizes and reduced stake dilution. According to a report by Moneycontrol, this move aims to simplify the listing process for well-established, cash-rich companies that may not require significant capital from the public markets.
SEBI is evaluating a plan to lower the initial dilution requirement for such companies to 2.5 percent plus Rs 2,500 crore, Moneycontrol quoted a source as saying. “This change could offer more flexibility to promoters and existing shareholders, especially when the company does not need to raise a large amount of capital through the IPO,” the source said.
This proposal is part of SEBI’s broader initiative to enhance the Ease of Doing Business and make the IPO route more practical, especially for large corporate groups and public sector undertakings (PSUs). A second source familiar with the discussions told Moneycontrol, “The idea has been discussed internally and may soon be released as a consultation paper for public feedback.”
As part of the overhaul, the market regulator is also looking at revising the current market capitalisation slabs used to determine minimum offer sizes. Under current norms, companies with a post-issue market cap between Rs 4,000 crore and Rs 1,00,000 crore must adhere to specific dilution thresholds. SEBI may raise the lower end of this range to Rs 50,000 crore, the report said.
Currently, companies valued at over Rs 1,00,000 crore after an IPO are required to dilute at least 5 percent and reach 10 percent public shareholding within two years, eventually increasing to 25 percent within five years of listing. These rules were last revised in June 2021.
Industry stakeholders have argued that these requirements force companies with strong balance sheets—especially PSUs and profitable private entities—to float large IPOs even when they do not need fresh capital. “Public sector undertakings (PSUs) have also faced challenges under these rules, as they may not need fresh capital but are still expected to meet strict public shareholding norms,” a source told Moneycontrol. “These constraints have prompted SEBI to review the existing framework and explore more practical options.”
Another concern raised is the negative investor sentiment that often follows news of forced stake dilution. “When investors learn that a company is required to offload a certain percentage of its stake to meet minimum public shareholding norms, it can lead to a drop in the stock price—even when there is no change in the company’s financials,” a second source noted.
As it stands, under the Securities Contracts (Regulation) Rules, 1957, companies with post-IPO market capitalisation:
- Above Rs 1,00,000 crore must dilute 5% at IPO and Rs 5,000 crore more later,
- Between Rs 4,000 crore and Rs 1,00,000 crore must dilute at least 10% at IPO and reach 25% public shareholding in three years,
- Between Rs 1,600 crore and Rs 4,000 crore must achieve 25% public shareholding in three years, and
- At or above Rs 1,600 crore must dilute 25% overall.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
view comments
- First Published:
