The Securities and Exchange Board of India on Monday proposed lowering the minimum dilution requirement for mega initial public offerings (IPOs), a move expected to benefit large listings such as Reliance Jio Infocomm and the National Stock Exchange.
Under the proposed norms, companies with a market capitalisation exceeding Rs 5 trillion would be allowed to significantly reduce their minimum public offer (MPO).
For instance, under the current framework, a company with a market valuation of Rs 15 trillion must come out with an MPO worth Rs 80,000 crore. This has been proposed to be reduced to Rs 37,500 crore.Such large companies would also be given up to 10 years to achieve the 25 per cent minimum public shareholding (MPS) requirement, compared with five years at present.
These proposals have been recommended to the ministry of finance for amendments to the Securities Contracts (Regulation) Rules (SCRR).The larger the company, the greater the benefit in terms of reduced MPO.
Currently, companies with a post-issue market capitalisation above Rs 1 trillion must dilute at least 5 per cent of their equity. They also have a two-year window to increase public shareholding to at least 10 per cent, and five years to reach 25 per cent. Under the new proposal, companies with a post-issue market cap above Rs 5 trillion would need to offer shares worth Rs 15,000 crore, plus at least 1 per cent of market capitalisation.
For companies with market caps between Rs 1 trillion and Rs 5 trillion, the minimum public offer would be Rs 6,250 crore, plus 2.75 per cent of market value.Firms with market caps between Rs 50,000 crore and Rs 1 trillion would have a reduced minimum offer of Rs 1,000 crore and 8 per cent dilution of market capitalisation.
-- Khushboo Tiwari, Business Standard
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