The process for large companies to list on the stock market in India has now become easier. The government has changed the rules related to Initial Public Offerings (IPOs).
Under the new rules, companies that have a post-listing market value of more than ₹5 lakh crore will only need to sell 2.5% of their paid-up capital to the public.
Earlier, many big companies found it difficult to launch public issues because they had to offer a larger portion of their shares to the public.
With the new rules, the government aims to make stock market listing easier for large companies while still maintaining investor participation.
Key Changes in IPO Rules
Under the new guidelines, companies must reserve at least 2.5% of each class of equity shares for public investors.
The government has also introduced a timeline that companies must follow to gradually increase public shareholding over time.
If a company’s public shareholding is less than 15% at the time of listing, it must increase it to 15% within five years and then to 25% within ten years.
However, if a company already has more than 15% public shareholding at the time of its IPO, it must raise that figure to 25% within the next five years.
Public Shareholding Based on Market Value
The government has also created different rules based on a company’s market capitalization.
Companies with a market value between ₹1 lakh crore and ₹5 lakh crore must offer at least 2.75% of their shares to public investors when they launch an IPO.
For smaller companies, the required public shareholding is higher. For example, companies with a market cap between ₹50,000 crore and ₹1 lakh crore must issue at least 8% of their shares to the public to ensure adequate investor participation.
Another important rule relates to companies that have Superior Voting Rights (SVR) shares. If such a company wants to list its ordinary shares on the stock exchange, it will also be required to list its SVR shares.
Easier Path for Large Companies Like NSE and Reliance Jio
The government has officially implemented these new rules. Experts believe that these changes could encourage several large companies to launch their IPOs.
In particular, companies like the National Stock Exchange and Reliance Jio may now find it easier to list on the stock market under the updated guidelines. ????