SEBI to reduce share size sales for large firms set to launch IPOs
Market experts have welcomed the changes that will enable companies to make effective plans
The Securities and Exchange Board of India (SEBI) has proposed reducing the minimum size of share sales for large companies listing their stock to simplify fund-raising.
It said that large issuers often faced challenges in diluting their equity through Initial Public Offerings (IPOs), as the market might struggle to absorb such sizable offerings. The market regulator maintained that it could discourage companies from opting to list in India and restrict investment opportunities for domestic investors.
The proposal includes allowing companies to sell a minimum of 2.5 percent of their paid-up share capital in an IPO, from the mandated 5 percent. That is, if their market capitalisation is above Rs.5 trillion ($57 billion) after the listing.
SEBI also proposed that companies with post-listing market capitalisation of Rs.500 billion to Rs.1 trillion could meet the required 25 percent public float in five years instead of the current three years. Similarly, companies with post-listing market cap, exceeding Rs.1 trillion, will be allowed up to 10 years to comply with the norms.
Commenting on the move, Abhimanya Bhattacharya, partner at Khaitan and Co said, “SEBI’s consultation paper recognises several challenges faced by large issuers when raising capital from the public. These are welcome changes and will enable large issuers to plan their IPO and post-dilution plans effectively.”