The central government has amended the rules governing minimum public shareholding (MPS), introducing a graded framework that allows large companies to offer a smaller portion of shares to the public at the time of their initial public offering (IPO).

The move comes amid a strong pipeline of public issues expected in 2026, estimated at more than ₹2.65 lakh crore, with prospective listings by Jio Platforms, National Stock Exchange of India, Zepto and PhonePe.

The changes were notified on Friday through the Securities Contracts (Regulation) Amendment Rules, 2026, issued by the ministry of finance under the Securities Contracts (Regulation) Act, 1956.

The revised framework, first proposed by the Securities and Exchange Board of India (Sebi) at its board meeting in September 2025, introduces a tiered structure based on the size of a company’s post-issue capital calculated at the public offer. The objective is to make it easier for very large companies to go public while ensuring that public shareholding gradually rises to the standard 25 per cent level.

Under the amended rules, effective March 13, companies with post-issue capital above ₹50,000 crore but up to ₹1 lakh crore will be required to offer shares worth at least ₹1,000 crore and maintain a minimum public shareholding of 8 per cent at the time of listing. The earlier requirement was 10 per cent.

Greater flexibility has been provided for even larger issuers. Companies with post-issue capital above ₹1 lakh crore but up to ₹5 lakh crore will now need to offer shares worth at least ₹6,250 crore and maintain a minimum public shareholding of 2.75 per cent at listing, compared with the earlier requirement of 5 per cent.

For companies with post-issue capital exceeding ₹5 lakh crore, the minimum public float requirement has been reduced further. Such companies will be required to offer shares worth at least ₹15,000 crore and maintain a minimum public shareholding of 1 per cent at the time of listing, down from the earlier 5 per cent.

The amendment also sets out timelines for large companies to gradually increase their public shareholding. If the public shareholding at the time of listing is below 15 per cent, the company will have to raise it to at least 15 per cent within five years and further increase it to 25 per cent within ten years of listing. Where public shareholding at the time of listing is already 15 per cent or higher, the company will have to increase it to 25 per cent within five years.

The government has clarified that the timelines to achieve the prescribed public shareholding will also apply to companies that were listed before the commencement of the amendment. However, recognised stock exchanges may impose fines or penalties for any past non-compliance with public shareholding norms.

The changes were proposed by Sebi to address market concerns that large issuers may face difficulties in diluting substantial stakes through IPOs, as the market may not be able to absorb such a large supply of shares. This could discourage such companies from listing domestically. In addition, continued dilution after listing to meet MPS requirements could create a price overhang due to impending equity supply, potentially affecting existing public shareholders.