SEBI plans relaxing minimum public offer size for large IPOs, keeps 35% retail quota intact

India's capital markets regulator SEBI has proposed easing listing norms for very large companies, aiming to reduce the immediate burden of public shareholding while ensuring gradual compliance. The move could reshape how big-ticket IPOs are structured and timed.

The proposed framework, if adopted, would let large issuers dilute their stakes more gradually, avoiding pressure on markets while keeping retail participation intact. SEBI plans to retain the 35% retail quota, reversing its earlier proposal to reduce it for IPOs above ₹5,000 crore.

Large issuers, SEBI noted, often face challenges in offloading substantial stakes via IPOs, which can overwhelm the market. The revised approach allows them to start with smaller offerings and meet the 25% minimum public shareholding (MPS) requirement over a longer horizon.

Under the draft rules

• Companies with market caps between ₹50,000 crore and ₹1 lakh crore must offer at least ₹1,000 crore and 8% of post-issue capital, with five years to reach 25% MPS.
• For those valued between ₹1 lakh crore and ₹5 lakh crore, the minimum public offer (MPO) would be ₹6,250 crore and 2.75% of post-issue capital. If the initial public holding is under 15%, the 25% threshold must be met in 10 years; otherwise, in five.
• Entities above ₹5 lakh crore would need to offer ₹15,000 crore and at least 1% of post-issue capital, subject to a minimum 2.5% dilution. The same staggered timeline applies depending on initial public shareholding.

SEBI believes the phased approach would avoid excess supply, which could pressure stock prices despite solid fundamentals. This move is also aimed at encouraging mega listings on domestic bourses, following high-profile IPOs like LIC and Hyundai Motor India.

Average IPO sizes have grown sharply, reaching ₹2,057 crore in FY25 from ₹1,488 crore in FY20. Currently, companies with market capitalisation up to ₹1,600 crore must offer 25% public shareholding at listing, while mid-sized firms have leeway to comply over 3-5 years.

SEBI is inviting public feedback on the proposals until September 8.