SEBI Proposes IPO Norms

Context:

SEBI has recommended to the Union Government to relax Minimum Public Shareholding (MPS) norms for large companies coming up with big IPOs, aiming to facilitate better primary market listings and investor participation.

Background:

Minimum Public Shareholding (MPS): The minimum percentage of a listed company’s shares that must be held by the public. Currently, it is 25% of post-issue capital.
Existing Norms: For issuers with post-issue market cap > ?1,00,000 crore, they must offer ?5,000 crore and at least 5% of post-issue market cap to public.

SEBI’s Recommendations:

Scale-based relaxation: Large IPOs can list with a lower initial public float; MPS of 25% to be achieved gradually (up to 5 years).
For companies with market cap ?50,000–100,000 crore: Minimum public offer of ?1,000 crore and at least 8% of post-issue market cap.
Rationale:
- Large issuers face challenges in absorbing huge supply during IPOs.
- Avoid price overhang caused by mandatory dilution.
- Facilitate retail investor participation without affecting liquidity.