SEBI Proposes Easing Minimum Equity Dilution Norms For Large IPOs

On Friday, the Securities and Exchange Board of India (SEBI) proposed a reduction in the size of large initial public offerings (IPOs), which is expected to help large companies comply with share sale rules. In a consultation paper, the market regulator has proposed that companies with post listing capital of over Rs 10,000 crore will be required to only sell 5 percent of the company to the public, keeping promoter shareholding at 95 percent for a fixed period.

At present, companies with over Rs 4,000 crore post-issue market capital are required to offer at least 10% to public and subsequently bring down their promoter holding to 75% over a period of time.

"It has been represented that such large issuers already have investments by private equity and other strategic investors who are classified as public shareholders post-listing and therefore, mandating minimum 10% of post-issue MCap at the time of IPO leads to unnecessary dilution of holding of the promoter or existing shareholder and is therefore a constraining factor for listing," SEBI said in its paper.

"Market participants have provided feedback that the compliance with minimum offer to public requirement i.e. at least 10% of post issue paid up capital calculated at offer price .. is cumbersome for large issuers," it added.

It has been recommended that companies with post issue market capital of over Rs 10,000 crore but less than Rs 1 lakh crore would be required to achieve 10 percent minimum shareholding requirement in 18 months and 25% within three years from the date of listing.

The regulator has sought public comments by 7 December on the same.