Sebi proposes to ease IPO norms for large companies

Mumbai: The Securities and Exchange Board of India (Sebi) is proposing to ease norms for large companies looking to sell shares through an Initial Public Offering (IPO). The regulator has recommended to reduce the minimum proportion of shares (MPS) that such companies must offer to the public in the issue.

The proposal would allow entities such as the National Stock Exchange (NSE) and Reliance Jio Infocomm, which command multi-billion dollar valuations, to go public with a smaller float.

"For such large issuers, diluting 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 listings in India," Sebi said in a discussion paper on Monday.

The regulator said for companies with a post IPO market cap above ₹50,000 crore, the minimum share sale would have to be at least 8% from the current 10%. For companies, with a post issue market cap of over ₹1 lakh crore and ₹5 lakh crore, they would have to dilute at least 2.75% and 2.5%, respectively. Now, companies with a post-issue market cap above ₹1 lakh crore had to dilute at least 5% of equity.

ET in its edition dated August 1, 2025, had reported that Sebi is considering a proposal to allow large companies with valuations exceeding ₹1 lakh crore to dilute only 2.5% of their equity base.

Minimum Public Shareholding
The regulator has also proposed relaxations in the timeline to meet the minimum public holding norms.

For issuers with a post issue market capitalisation above ₹50,000 crore, the timeline for compliance with the minimum public shareholding requirement of 25% would be extended to five years from the existing three years from date of listing.While for issuers with a post issue market cap above ₹1,00,000 crore, if the public shareholding is less than 15% as on the date of listing, then minimum public holding of 15% can be achieved within five years and 25% within 10 years from date of listing.

"Mandating substantial equity dilution for meeting the MPS requirements, immediately after the IPO can lead to an oversupply of shares in the market. This anticipation of further dilution may impact the share prices, despite strong company fundamentals, and may adversely impact existing public shareholders," it said.

The regulator said it would make recommendations to the finance ministry to amend the Securities Contracts (Regulation) Rule to provide flexibility to large issuers.

Sebi said, this would allow large issuers to undertake fund raising in a phased manner and facilitate issuers to plan and execute fund-raising activities.

In 2021, the minimum public shareholding rules were introduced. Under these provisions, issuers with a post issue market cap above ₹1 lakh crore are required to dilute at least 5% at the time of the IPO and are mandated to increase their public shareholding to 10% within 2 years and further to 25% within 5 years from date of listing.

"For very large market cap companies...this will reduce requirements to seek ad hoc or one time Sebi relaxations. This move will further ease the pressure on secondary capital markets, where only issuers with genuine capital requirements will tap into for a fund raise," said Arka Mookerjee, partner, JSA Advocates & Solicitors.