SEBI Overhauls IPO Rules: Eases Public Float Requirements for Large Companies
SEBI introduced new IPO regulations with tiered minimum public float requirements based on post-issue market capitalization. Companies with market cap above ₹50,000 crore can have as low as 2.5% public float. Timeline to achieve 25% public shareholding extended to 5-10 years. Anchor investor participation expanded, allowing more investors for larger allocations. New categories like life insurance companies and pension funds added to reserved portion for anchor investors.
*this image is generated using AI for illustrative purposes only.
The Securities and Exchange Board of India (SEBI) has introduced significant changes to its initial public offering (IPO) regulations, particularly benefiting large companies planning to go public. These new rules create a more flexible framework for public float requirements based on post-issue market capitalization.
New Threshold Levels
SEBI has established four additional threshold levels for companies based on their post-issue market capitalization:
- ₹4,000 crore to ₹50,000 crore
- Above ₹50,000 crore
- A higher tier above ₹50,000 crore
- The highest tier above ₹50,000 crore
Revised Minimum Public Float Requirements
The regulator has introduced a tiered system for minimum public float requirements:
| Market Capitalization | Minimum Public Float |
|---|---|
| ₹4,000 - ₹50,000 crore | 10.00% |
| Above ₹50,000 crore | 8.00% |
| Higher tier | 2.75% |
| Highest tier | 2.50% |
This graduated scale allows larger companies to have a lower initial public float, potentially making it easier for them to list on public exchanges.
Extended Timeline for Achieving 25% Public Shareholding
SEBI has extended the timeline for achieving the 25% minimum public shareholding:
- Companies now have 5 to 10 years to reach this threshold, depending on their size.
This extended period gives large companies more time to gradually increase their public float without putting undue pressure on their stock price or market dynamics.
Enhanced Anchor Investor Participation
SEBI has also expanded the scope for anchor investor participation in IPOs:
- For IPOs with allocations above ₹250 crore, 5-15 investors are now allowed.
- An additional 15 investors are permitted for every extra ₹250 crore allocation.
This change aims to broaden the base of institutional investors participating in large IPOs, potentially improving price discovery and stability.
Inclusion of New Investor Categories
The regulator has added new categories to the reserved portion for anchor investors:
- Life insurance companies
- Pension funds
These institutions join domestic mutual funds in the reserved category, diversifying the pool of anchor investors and potentially bringing more long-term, stable investors into the IPO process.
Conclusion
The new regulations reflect SEBI's efforts to adapt to the evolving needs of the Indian capital markets, particularly as more large companies consider going public. By easing the public float requirements and providing more flexibility in timelines and investor participation, SEBI aims to encourage more large-scale listings while maintaining market integrity and investor protection.
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