MUMBAI: To simplify fundraising by large companies through initial public offering, the markets regulator Sebi has drastically lowered the minimum public float norms for large primary share sales or IPOs based on the likely post-issue market capitalisation.
Companies can now sell a minimum of 2.5% of their paid-up share capital in their IPO from the current 5% if their market capitalisation is above Rs 5 trillion after the listing, Sebi chairman Tuhin Kanta Pandey told reporters here Friday after a board meeting that also cleared a slew of other regulations to further relax the ease of doing business.
He said lowering the minimum offer size to 2.5% is aimed at making it easier for the market to absorb the sizeable offerings. For companies that have a market cap between Rs 1 trillion and Rs 5 trillion, Sebi has called for a minimum public offer of up to Rs 6,250 crore or 2.75% of the post-issue market capitalisation.
For issues with under Rs 4,000 crore mcap, there is no change in the norms, Pandey added.
The chairman also said the board did not approve a proposal to lower the IPO portion reserved for retail investors to 25% from the present 35%, saying retail participation is crucial for the orderly development of the equity market.
For companies with market cap between Rs 50,000 crore and Rs 1 trillion, the minimum public shareholding (MPS) of 25% is to be achieved in five years as against the current three years.
When asked whether these changes will apply prospectively only, he didn’t give a direct reply, saying, “The government will have to approve the changes and notify them. That means large issues already completed may get the benefit of longer time frame to bring down their stakes to increase the public float as the new norms can be grandfathered."
Firms with a post-listing market cap exceeding Rs 1 trillion will be allowed up to 10 years to comply with the norm, it said.
"We are introducing four additional thresholds beyond the existing Rs 4,000 crore level: Rs 4,000 crore to Rs 50,000 crore, Rs 50,000 crore to Rs 1 trillion, Rs 1 trillion to Rs 5 trillion, and above Rs 5 trillion, and for companies with a post-issue market capitalization of more than Rs 5,500 crore but not exceeding Rs 1 trillion, it is proposed to revise the minimum public offer from the current requirement of 10% of the post-issue market capitalization to Rs 1,000 crore plus at least 8% of the post-issue market capitalization, thereby creating a scale-based threshold," said Pandey.
The chairman further said, "For companies with a post-issue market capitalization of Rs 1 trillion and above, the minimum public offer is proposed to be Rs 6,250 crore plus at least 2.75% of the post-issue market cap, and for those with a market cap of above Rs 5 trillion, the requirement will be Rs 15,000 crore plus 1% of the post-issue market cap.”
The board also reduced the proportion of shares large companies looking to list must sell and announced simpler disclosures for low-value transactions between interconnected entities, or "related parties".
The board also approved a proposal to make it easier for low-risk foreign investors to participate in the securities market with the introduction of a single window access. This is aimed at simplifying compliance and enhancing the country's attractiveness as an investment destination.
To enhance the attractiveness of IPOs for global funds, Sebi has decided to revamp share-allocation framework for anchor investors in companies' maiden public offerings.
Additionally, it has been decided to overhaul the governance framework of market infrastructure institutions including stock exchanges by mandating the appointment of two executive directors to bolster operational oversight.
Other decisions taken by the board are the following:
Re-classifying Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as equity instruments
Broadening the definition of 'strategic investor' under the REIT and InvIT norms by including QIBs
Overhauling governance framework of stock exchanges by mandating the appointment of two executive directors
Clearing a lighter regulatory framework for AIFs with accredited investors.
The regulator has also launched a single window automatic and generalised access for trusted foreign investors (Swagat-FI) as also a India market access website for foreign investors which will act as a one-shop window for all rules and regulations that a foreign exchange investor has to meet in terms of Sebi, RBI and IRDAI norms as well as taxation norms.