Big Change in IPO Rules: Govt Updates Minimum Public Offer Norms for for IPO-bound Firms

For easing the listing process for large companies while also ensuring sufficient public participation, The Government of India has revised the minimum public offer (MPO) norms for companies planning to list on Indian stock exchanges.

The new framework announced by the government links the minimum public shareholding requirement to a company's post-issue market capitalisation, calculated at the offer price.

The revised structure is expected to help large firms raise capital from the markets without having to dilute a large portion of their equity, while still maintaining adequate liquidity for investors.

All About The Revised minimum public offer rules

As per the official notice, the percentage of shares that companies must offer to the public will vary depending on their post-issue valuation.
For companies with post-issue capitalisation of up to Rs. 1,600 crore, the existing requirement largely remains unchanged. Such firms will need to offer at least 25% of each class or kind of equity shares or convertible debentures to the public.

For companies with post-issue capitalisation between Rs. 4,000 crore and Rs. 50,000 crore, the government has lowered the threshold. These companies will now be required to offer at least 10% of each class or kind of equity shares or convertible debentures to the public.

For firms with post-issue capitalisation between Rs. 50,000 crore and Rs. 1 lakh crore, the revised framework introduces a value-based formula. Companies in this category must offer a percentage equivalent to the value of Rs. 1,000 crore and at least 8% of each class or kind of equity shares or convertible instruments.

For even larger companies with post-issue capitalisation between Rs. 1 lakh crore and Rs. 5 lakh crore, the public offer must be equivalent to the value of Rs. 6,250 crore and at least 2.75% of each class or kind of shares or convertible securities.

Main Purpose of This Revision

The revised minimum public offer norms are introduced to encourage more large companies to tap into India's capital markets while maintaining the principle of public shareholding.

Impact on upcoming IPOs

The changes could have a big impact on future IPOs, particularly those involving large companies with multi-billion-dollar valuations.
By matching the public shareholding requirements with the size of the company, the government is expecting to make the IPO framework more practical for large issuers.