Source: BS
Context:
The Securities and Exchange Board of India (SEBI) recently relaxed the Minimum Public Shareholding (MPS) requirements for large companies at the time of listing. The move allows:
Key Changes:
- Initial Public Offer (IPO) Requirement:
- Large companies can now list with as low as 2.5% public shareholding at the time of listing.
- Timeline to Achieve Full MPS:
- Companies have a 10-year period to reach the standard 25% MPS threshold, instead of meeting it immediately at listing.
- Target Companies:
- Mostly large issuers with deep-pocketed promoters.
- Includes companies with substantial pre-IPO private equity investments or strategic placements.
- Some government-owned enterprises may also fall in this category.
- Rationale by SEBI:
- Avoid immediate oversupply of shares that could depress prices.
- Large companies may not need additional funds at IPO.
- Facilitates pre-IPO private investments and provides exit opportunities for existing investors.
- Implications for Investors and Governance:
- Minimal public shareholding reduces influence of minority shareholders.
- May not significantly enhance corporate governance.
- Extended timelines could cause valuation uncertainties and confusion for investors.
