SEBI eases minimum public shareholding rules for large IPO-bound firms

The Securities and Exchange Board of India (SEBI) has introduced significant relaxations to Minimum Public Shareholding (MPS) requirements, easing the burden on large companies preparing for initial public offerings (IPOs) as well as those already listed but yet to meet prescribed thresholds.

For companies with a market capitalisation of up to rs 50,000 crore, there is no change — the requirement to maintain 25% public float within three years of listing remains intact. However, for companies with a market value between Rs 50,000 crore and Rs 1 lakh crore, SEBI has given more breathing room. Such entities will now be allowed five years to reach the 25% MPS requirement, instead of the earlier three-year deadline.

SEBI Chairperson Tuhin Kanta Pandey stated that four new thresholds are being introduced above the existing Rs 4,000 crore level — Rs 4,000–50,000 crore, Rs 50,000 crore–Rs 1 lakh crore, Rs 1–5 lakh crore, and above Rs 5 lakh crore. For companies with a post-issue market capitalization of more than Rs 5,500 crore but not exceeding Rs 1 lakh crore, the minimum public offer requirement will be revised from 10% to Rs 1,000 crore plus at least 8% of the post-issue market capitalization, thereby creating a scale-based threshold.

“Diluting a 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 listing in India,” SEBI Chairman Tuhin Kanta Pandey said.

Explaining the rationale, SEBI stated in its release: “The challenges in undertaking substantial equity dilution within a short timeframe, as faced by new issuers, are equally applicable to all listed entities, that are yet to comply with MPS. Extending the proposed timelines to listed entities will ensure consistency and parity in regulatory treatment. Accordingly, the board has recommended that the proposed extended timelines may also be made applicable to the listed entities that are yet to comply with MPS, as per the existing timelines applicable to them.”

Key changes to MPS norms

The regulator has created a scale-based framework depending on company size:

MCap ≤ ₹1,600 crore – No change; companies must maintain 25% public shareholding.

₹1,600 crore

₹4,000 crore

₹50,000 crore

₹1,00,000 crore

If public shareholding is below 15% at listing: MPS of 15% to be reached within 5 years, 25% within 10 years.

If public shareholding is 15% or higher: MPS of 25% to be achieved within 5 years.

MCap > ₹5,00,000 crore – Minimum public offer of ₹15,000 crore or 1% of post-issue market cap, with a minimum dilution of 2.5%.

If public shareholding is below 15% at listing: 15% to be achieved within 5 years, 25% within 10 years.

If public shareholding is 15% or higher: 25% to be achieved within 5 years.

Other changes

Anchor investor quota has been raised from 33% to 40% for Qualified Institutional Buyers (QIBs).

Retail investor reservation in IPOs will remain unchanged at 35%.

The regulator said the extended compliance window will help issuers avoid excessive equity dilution in a short span, ensuring better price stability and protecting existing shareholders’ interests.

At the conclusion of its board meeting, SEBI reiterated that the revised norms are aimed at balancing fund-raising needs of companies with regulatory safeguards, while providing greater flexibility for both new IPOs and already-listed firms.