India’s biggest companies may soon find it easier to go public. The capital markets regulator, SEBI, has floated a new set of proposals.
This move by the market regulator is aimed at making IPOs for mega-cap firms more practical and less burdensome.
The draft framework will be open for public comments till September 8. This move looks to cut down the size of mandatory public offerings and give companies more time to meet public shareholding norms.
So, what exactly is changing? Let’s take a look –
Why is SEBI looking at new rules
Currently, very large companies have to offload a significant chunk of their shares to the public upfront, which often leads to massive IPO sizes.
These large issues are difficult for the market to absorb and can weigh on stock prices for years. This rigid framework may even discourage mega companies from listing in India. The new plan, therefore, introduces a tiered approach where IPO requirements vary depending on the company’s market capitalisation.
Some of the key proposals by the market regulator include –
Smaller IPOs for mega-cap firms
Instead of forcing large companies to bring oversized IPOs, SEBI suggests lowering the minimum public offer (MPO) thresholds. For example:
Under the draft framework, firms valued between Rs 50,000 crore and Rs 1 lakh crore will need to float an issue of at least Rs 1,000 crore, ensuring a minimum 8% stake dilution. Those in the Rs 1 lakh to 5 lakh crore bracket must bring in at least Rs 6,250 crore through IPOs, equal to 2.75% equity.
Furthermore, mega companies worth over Rs 5 lakh crore will be required to raise a minimum of Rs 15,000 crore, with at least 1% stake dilution or 2.5% of post-issue equity, whichever is higher.
Ease minimum float deadlines
This proposal will also ease companies to comply with the 25% minimum public shareholding (MPS) rule.
If public shareholding is below 15% at listing, companies will get five years to reach 15% and ten years to reach 25%.
On the other side, if public shareholding is already above 15% at listing, the 25% target must be achieved within five years.
This is a big shift from the current three-to-five-year timelines.
Retail quota trimmed for jumbo IPOs
For IPOs bigger than Rs 5,000 crore, SEBI proposes cutting the retail investor allocation from 35% to 25%.
Gradual dilution instead of heavy upfront selling
Large issuers, especially PSUs and cash-rich firms, often struggle to meet heavy dilution norms. The new plan would let them list with smaller IPOs first and then increase public shareholding over time.