The Securities and Exchange Board of India (SEBI) on Friday proposed relaxing regulations for equity dilution for large initial public offerings (IPO), wherein companies with a post-issue capital of more than Rs 10,000 crore would be required to offer a minimum of 5 per cent stake in the IPO.
As per the current provision, minimum public shareholding of 10 per cent has to be achieved during the IPO by companies with a post issue capital of Rs 4,000 crore.
"It is proposed to reduce minimum offer to public for large issuers to 5 per cent of post issue market capital exceeding Rs 10,000 crore," said a SEBI circular.
The regulator said that it has been represented that such large issuers already have investments by private equity or other strategic investors who are classified as public shareholders post listing and therefore, mandating minimum 10 per cent of post issue market cap at the time of IPO leads to unnecessary dilution of holding of the promoter or the existing shareholder and is therefore, a constraining factor for listing.
It further said that there could be a scenario in case of large and very large issuers that they may not be compliant with 10 per cent minimum public shareholding at the time of listing. Thus, there may arise a need to provide additional time to such issuers to first comply with 10 per cent MPS and subsequently with 25 per cent MPS, it added.
Accordingly, SEBI has now proposed a minimum shareholding of 10 per cent to be achieved in 2 years time and 25 per cent within 5 years from the date of listing for companies with post issue market cap of Rs 1 lakh crore.
For companies with post issue market cap of Rs 10,000 crore to Rs 1 lakh crore, minimum public shareholding of 10 per cent is to be achieved in 18 months and 25 per cent within 3 years from the date of listing.
SEBI has sought public comments on the proposals from market participants, including issuer companies and investors, by December 7.