The Securities and Exchange Board of India (SEBI) has unveiled a proposal to relax Initial Public Offering (IPO) norms for large companies valued above Rs 1 lakh crore. This move aims to provide more flexibility in meeting public shareholding requirements, potentially reshaping the landscape for big-ticket IPOs in India.

Key Proposals

• Smaller IPOs for Larger Companies: Companies with valuations exceeding Rs 1 lakh crore will be permitted to launch smaller IPOs.
• Extended Timelines: These companies will receive longer periods to meet public shareholding targets.

Proposed Timeline Structure

Below 15% Public Shareholding at Listing

• 5 years to reach 15% public shareholding
• 10 years to achieve 25% public shareholding

Above 15% Public Shareholding at Listing

• 5 years to reach 25% public shareholding

Implications for Different Company Sizes

Additional Points

• Companies that previously missed deadlines may potentially benefit from these new proposals.
• Past violations will still be subject to penalties.
• SEBI has maintained the current 35% retail investor allocation in IPOs for all sizes, dropping an earlier proposal to reduce it to 25% for large IPOs above Rs 5,000 crore.

Public Consultation

SEBI has opened these proposals for public feedback until September 8, allowing stakeholders to provide input on these significant changes to the IPO landscape.

These proposed changes could have far-reaching effects on the Indian IPO market, particularly for large corporations considering going public. The extended timelines and flexibility in public shareholding requirements may encourage more large companies to enter the public market, potentially stimulating economic growth and providing new opportunities for investors.

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing significant changes to India's Initial Public Offering (IPO) market rules, igniting a debate about the balance between institutional and retail investor interests.

Key Proposed Changes

1. Reduced Retail Allocation: For IPOs above ₹5,000 crore, SEBI suggests reducing retail investor allocation from 35% to 25%.
2. Modifications to Anchor Investor Allotment: Changes to the discretionary allotment process for anchor investors are proposed.
3. Insurance Company Reservations: New reservations for insurance companies in IPOs are being considered.
4. Retail Investor Sales Flexibility: The proposal includes measures to increase flexibility for retail investor sales.

Rationale Behind the Proposals

SEBI cites a muted response to some large issues as the primary reason for these proposed changes. The regulatory body argues that the current segmentation between institutional and retail investors may be outdated, suggesting a unified IPO market approach similar to secondary markets.

Critical Reception

The proposals have faced criticism from some quarters, with detractors arguing that these changes favor institutional investors over retail participants. Critics contend that in the digital age, the information asymmetry between institutional and retail investors has narrowed, questioning the need for such reforms.

Recent IPO Performance Data

To put these proposals in context, recent IPO performance data reveals:

This data is based on 11 IPOs above ₹5,000 crore since 2022.

Case Study: Bajaj Finance IPO

Contrary to the trend of muted responses, some large IPOs have seen significant retail interest. For instance, the Bajaj Finance IPO received:

• 9 million applications
• 67x oversubscription in retail segments

Implications and Next Steps

These proposed reforms could significantly alter the landscape of India's IPO market. As the consultation process continues, it remains to be seen how SEBI will balance the interests of various stakeholders and whether these changes will lead to a more efficient and equitable IPO market.

Stakeholders and market participants are expected to provide feedback on these proposals, which will likely shape the final form of any new regulations implemented by SEBI.