Capital market regulator Sebi on Friday recommended a revision of norms governing minimum public offers and timelines for meeting minimum public shareholding, easing IPO dilution for large companies.
Under the old norms, companies with a market capitalisation above ₹1 lakh crore had to offer at least ₹5,000 crore and 5 per cent of post-issue market cap, reaching 10 per cent minimum public shareholding (MPS) in two years and 25 per cent in five years.
Sebi now proposes an minimum public offer (MPO) of ₹6,250 crore and at least 2.75 per cent. If public shareholding is below 15 per cent at listing, MPS targets are 15 per cent in five years and 25 per cent in 10 years. If public shareholding is 15 per cent or more, the MPS target is 25 per cent in five years. For more than ₹5 lakh crore market cap companies, MPO is ₹15,000 crore and at least 1 per cent, with similar timelines.
“For large issuers, diluting a substantial stake through an IPO can pose challenges as the market may not be able to absorb such a large supply of shares, which in turn may discourage such issuers from pursuing listing in India. Regular dilution post listing impacts issuers until MPS requirements are complied with. This may lead to price overhang due to the impending equity dilution, thereby adversely affecting the interest of existing public shareholders,” Sebi chairman Tuhin Kanta Pandey said following the 211th board meeting of the regulator.
The move, aimed at reducing market overhang and improving liquidity, will also apply to listed companies yet to meet MPS norms.
Anchor investor rules
In a bid to deepen the IPO market, Sebi has proposed amendments to expand anchor investor participation. Insurance and pension funds join mutual funds in the reserved anchor category, while the overall anchor reservation rises to 40 per cent. One-third remains for domestic mutual funds, and the rest is for insurance and pension funds.
Pandey said the flexible allotment rules will help large FPIs participate, enabling a more diversified anchor book.
MFs and REITs
Sebi reduced the maximum exit load on mutual funds from 5 per cent to 3 per cent while introducing incentives for distributors to attract new investors from beyond the top 30 cities (B-30) and women investors. It also reclassified Real Estate Investment Trusts (REITs) as equity instruments, making them eligible for greater mutual fund participation and index inclusion, while InvITs will retain hybrid classification.
FPIs and AIFs
Sebi’s proposed SWAGAT-FI framework (Single Window Automatic and Generalised Access for Trusted Foreign Investors) will enable low-risk global investors like sovereign and pension funds to benefit from unified registration, reduced compliance, and extended validity.
Sebi has also approved retail schemes with resident Indian sponsors in IFSCs (GIFT City) to register as FPIs. Alternative Investment Funds gain with new accredited investors (AI)-only schemes allowing lighter regulations. The minimum investment for Large Value Funds has also been proposed to be lowered from ₹70 crore to ₹25 crore to attract more risk capital.
Related party deals
The Sebi board also introduced scale-based thresholds for determining material related party transactions under its Listing Obligations and Disclosure Requirements (LODR). This includes simplified disclosure norms for smaller transactions and clarifications around exemptions. The changes, based on industry feedback, seek to balance investor protection with operational ease.