The Securities and Exchange Board of India (“SEBI”), in a consultation paper dated 20th November, 2020 has invited public comments on review of requirement of Minimum Public Offer for large issuers in terms of Securities Contracts (Regulation) Rules, 1957 (“SCRR”).
Securities market including the market for Initial Public Offerings (IPOs) is dynamic and needs to keep pace with the evolving market conditions. In view to address concerns of various market participants especially the investing community and the issuers, the regulations governing the primary market have been amended from time to time. Further, market participants have provided feedback that the compliance with minimum offer to public requirement i.e. at least 10% of post issue paid up capital calculated at offer price (‘post issue MCap’) under the SCRR is cumbersome for large issuers. Also, it has been represented that such large issuers already have investments by PE / other strategic investors who are classified as public shareholders postlisting and therefore, mandating minimum 10% of post issue MCap at the time of IPO leads to unnecessary dilution of holding of the promoter/ existing shareholder and is therefore a constraining factor for listing.
The main objective of this consultation paper is to seek comments / views from the public and market intermediaries on Review of requirement of Minimum Public Offer to large issuers in terms of SCRR.
Proposal
• It is proposed to reduce minimum offer to public for large issuers to 5% of post issue market capital exceeding Rs. 10,000 Crs –
| Minimum offer to public | ||
| Post issue market capital | Existing Provision | Proposal |
| MCap ≤ 1600 | 25% |
Same as existing |
| 1600 < MCap ≤ 4000 | Such % equivalent to 400 | |
| 4000 < MCap ≤ 10000 | 10% | |
| MCap > 10000 | 10% | 1000 + 5% of MCap exceeding 10,000 |
• Also, there could be a scenario in case of large and very large issuers that they may not be compliant with 10% MPS at the time of listing. Thus, there may arise a need to provide additional time to such issuers to first comply with 10% MPS and subsequently with 25% MPS as proposed below:-
| Post issue market capital | Existing provision | Proposal |
| MCap ≤ 1,600 | Minimum offer of 25% to public |
Same as existing provision |
| 1600 < MCap ≤ 4,000 | MPS of 25% to be achieved in three years from date of listing | |
| 4000 < MCap ≤ 10,000 | MPS of 25% to be achieved in three years from date of listing | |
| 10,000 < MCap ≤ 1,00,000 | MPS of 25% to be achieved in three years from date of listing | MPS of 10% to be achieved in 18 months and 25% within 3 years from the date of listing |
| MCap > 1,00,000 | MPS of 25% to be achieved in three years from date of listing | MPS of 10% to be achieved in 2 years and 25% within 5 years from the date of listing |
The comments may be sent by email to Smt. Yogita Jadhav, GM at yogitag@sebi.gov.in, Shri Abhishek Rozatkar, AGM at abhishekr@sebi.gov.in and Shri Rajesh Kumar Meena, Manager at rajeshm@sebi.gov.in latest by December 07, 2020 with subject as “Review of requirement of Minimum Public Offer for large issuers in terms of SCRR” in the following format.
| Name of entity/ person:
Contact Number & Email Address: |
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| Sr. No. | Reference Para of the consultation paper | Suggestions / Comments | Rationale |
Source : Securities and Exchange Board of India
