In a bid to revive the primary market, the Securities and Exchange Board of India (Sebi) eased norms related to the size of an initial public offering (IPO) and pricing of preferential shares while allowing anchor investors to have a greater exposure to the offering.
Besides, Sebi at its board meeting held in the national capital on Thursday has also approved a proposal to allow bonus shares to be sold in an IPO even if they have been issued within less than a year.
The board decided that all companies with a post-issue capital above Rs 4,000 crore are compulsorily required to offer at least 10 per cent stake in the IPO. In other IPOs, the minimum dilution to the public will be 25 per cent, or Rs 400 crore, whichever is lower.
"This will remove the anomaly that a company just short of Rs 4,000 crore market capitalisation was required to dilute about Rs 1,000 crore while another company at Rs 4,000 crore market capitalisation was required to dilute only Rs 400 crore," Sebi said in a release.
Further, companies that dilute less than 25 per cent in an IPO will be given three years to comply with the minimum public shareholding norms, Sebi said.
"In order to make regulatory requirements consistent across the companies irrespective of post-issue capitalisation and to facilitate mid-size issuers who may not be in need of large funds, Sebi has decided to take up the following proposal with the Ministry of Finance to carry out suitable amendments to SCRR (Securities Contracts (Regulation) Rules, 1957)," the regulator said.
Sebi has also decided to increase the anchor investor's bucket to 60 per cent from the current requirement of 30 per cent of the institutional bucket. Moreover, the board approved the proposal to permit bonus shares issued in last one year prior to filing of the draft offer document to be offered for sale, provided that these bonus shares were issued out of the free reserves or share premium.
The market regulator has also agreed to replace the closing price norm with volume weighted average price in the pricing formula for preferential issues, among others.