SEBI board eases public offer norms, paves way for LIC IPO

In its meeting on Wednesday, Securities and Exchange Board of India (SEBI) has relaxed public issue norms for large companies, among other measures. The step is crucial for initial public offering (IPO) of Life Insurance Corporation of India (LIC), which otherwise would have faced problems with its debut on the equity market.

The market regulator has amended Securities Contracts (Regulation) Rules (SCRR), 1957, which reduces minimum public offer (MPO) requirement for companies with post-issue market capital exceeding Rs 1 lakh crore from 10 per cent of post-issue market capital (existing provision) to Rs 10,000 crore, plus 5 per cent of the incremental amount beyond Rs 1 lakh crore. These issuers shall be required to achieve at least 10 per cent public shareholding in two years and at least 25 per cent public shareholding within five years from the date of listing, SEBI further stated.

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Presently, issuers with post-issue market capital of at least Rs 4,000 crore or more are required to offer to public at least 10 per cent of their post-issue market capital. Further, such issuers are also required to achieve a minimum public shareholding (MPS) of at least 25 per cent within three years from the date of listing.

Without this amendment, the size of LIC would have created difficulties for the market in absorbing equity papers in future public issues that the insurer needed to launch to meet SEBI's shareholding norms after its IPO. These reforms come a little over a fortnight after Finance Minister Nirmala Sitharaman introduced amendments to relevant legislation during the Budget session to list LIC on markets.

In other decisions, SEBI amended the regulations for eligibility of portfolio managers. Now postgraduate degree in securities market of not less than one year offered by National Institute of Securities Markets (NISM) as eligible qualification for portfolio managers, investment advisers and research analysts. The board also approved amendment to Portfolio Managers Regulations with respect to NISM certification requirements.

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The SEBI board also repealed SEBI (Underwriters) Regulations, 1993 and amendment to SEBI (Merchant Bankers) Regulations, 1993, and SEBI (Stock Brokers) Regulations, 1992, to incorporate provisions related to net-worth, maintenance of records and other regulatory compliances for the underwriting activities. The respective regulations shall permit merchant bankers and stockbrokers to carry out underwriting activities, doing away with the requirement of separate regulations for underwriting activities.

The board also approved merger of SEBI (Regulatory Fee on Stock Exchanges) Regulations, 2006, with Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, to improve the ease of doing business and provide a consolidated view to users of Regulations.

Finance Minister Nirmala Sitharaman also addressed the SEBI board on Wednesday. It is customary for the Finance Minister to address regulators SEBI and Reserve Bank of India (RBI) after presenting the Union Budget. The Finance Minister was accompanied by Minister of State for Finance Anurag Singh Thakur, SEBI Chairman Ajay Tyagi, Economic Affairs Secretary Tarun Bajaj, Union Finance Secretary Ajay Bhushan Pandey and other members of SEBI board during the meeting.

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