SEBI Proposes Relief In IPO Norms For Big Companies — Check Key Details

The Securities and Exchange Board of India has proposed to give big IPO- bound companies some respite in following the 25% minimum public shareholding norm.

Even the firms that have previously missed the deadline to follow this rule may receive the benefits. However, past violations will not be condoned and penal provisions will remain applicable.

While there is no change for the small and mid-sized companies having a market cap of up to Rs 50,000 crore, large firms valued above Rs 1 lakh crore will be allowed to launch smaller IPOs than currently mandated, and will be given longer time to reach the 25% public shareholding mark, as per the proposal.

As per the existing norms, companies with post-issue capital of less than or equal to Rs 1,600 crore, at least 25% of each class of equity shares or convertible debentures must be offered to the public.

Where the post-issue capital exceeds Rs 1,600 crore but is less than or equal to Rs 4,000 crore, companies are required to offer such percentage of shares equivalent to a value of Rs 400 crore.

For companies with post-issue capital above Rs 4,000 crore but less than or equal to Rs 1 lakh crore, the requirement is at least 10% of each class of shares or convertible debentures.

Further, if the post-issue capital is above Rs 1 lakh crore, the existing norms mandate that companies must offer shares equivalent to Rs 5,000 crore and at least 5% of such class of securities.

However, now SEBI has proposed that, for companies with post-issue capital above Rs 50,000 crore but less than or equal to Rs 1 lakh crore, the offer size must be equivalent to Rs 5,000 crore and at least 8% of securities.

If the post-issue capital is above Rs 1 lakh crore but less than or equal to Rs 5 lakh crore, the company would need to offer shares equivalent to Rs 6,250 crore and at least 2.75% of its securities.

Finally, for the largest companies with post-issue capital above Rs 5 lakh crore, the requirement would be shares equivalent to Rs 15,000 crore and at least 1% of securities, subject to a floor ensuring that every company offers at least 2.5% to the public.

Another critical aspect is the timeline to achieve the statutory 25% minimum public shareholding. Under the current rules, companies with post-issue capital above Rs 4,000 crore but up to Rs 1 lakh crore are required to raise public shareholding to at least 10% within two years of listing and 25% within five years.

For companies in the Rs 1,600 crore to Rs 4,000 crore range, and those above Rs 4,000 crore but below Rs 1 lakh crore, SEBI requires that 25% MPS be achieved within three years of listing.

The proposed amendments extend these timelines considerably for large firms. Companies with public shareholding below 15% at the time of listing will be required to achieve 15% within five years and 25% within 10 years.

Where public shareholding is already above 15% on listing, such companies will need to reach the 25% threshold within five years.

Importantly, SEBI has clarified that this extended timeline will also apply retrospectively to past issuances of IPOs, although penal provisions for past non-compliance will continue to be applicable until the date of notification of the new rules.

The proposals have been put out for public consultation until Sept. 8, 2025.

SEBI has also dropped an earlier proposal to reduce the retail quota in IPOs. The regulator had suggested cutting the allocation for retail investors in large IPOs (above Rs 5,000 crore) from 35% to 25%. Following feedback, it has decided to retain the current 35% quota.