Sebi eases listing rules for large IPOs, paving way for LIC’s mega float

The (Sebi) on Wednesday eased the listing norms for large companies, paving the way for much-awaited mega float of Life Insurance Corporation (LIC).

The regulator has said large companies can now divest a minimum 5 per cent in the IPO instead of 10 per cent. Further, they will get five years instead of three to raise the public float to 25 per cent.

Experts said the move will encourage large-companies to opt for listing.

“For issuers with post issue market capital exceeding Rs 100,000 crore (Rs one trillion), the requirement of minimum public float will be reduced from 10 per cent of post issue market capital (existing provision) to Rs 10,000 crore plus 5 per cent of the incremental amount beyond Rs 100,000 crore. These issuers shall be required to achieve at least 10 per cent public shareholding in two years and at least 25 per cent public shareholding within five years from the date of listing,” said in a release.

Under the formula, a company with post-issue market cap of Rs 2 trillion, will have to divest a minimum of 7.5 per cent instead of 10 per cent.

The decision was taken at Sebi’s board meeting held on Wednesday. The meeting was also attended by Finance Minister Nirmala Sitharaman and Minister of State (Finance and Corporate Affairs) Anurag Thakur.

At the meeting, chairman Ajay Tyagi made presentation on current market trends, challenges and implementation roadmap for budget-related announcements.

Sebi-related key budget proposals include setting up of gold spot exchange, introduction of unified securities code and an investor charter

The Finance Minister stressed the need for timely implementation of the budget announcements relating to capital

The government is also looking to launch LIC’s IPO during the next financial year.

Under the earlier requirement, LIC would have been required to divest at least 10 per cent at one go. The latest change will give the government—which owns 100 per cent of LIC—flexibility to assess market demand and opt for lower dilution.

“The changes will be beneficial for large like LIC,” said Tyagi on the sidelines.

Under the current rules, a company with post-listing market capitalisation of Rs 4,000 crore, needs to offer at least 10 per cent stake to public shareholders. And those below Rs 4,000 crore have to offload at least 25 per cent. The rules are aimed at ensuring adequate public float and better price discovery.

Experts said the new rules will benefit large issuers but could also lead to concerns around low public float.

At the board meeting, also prescribed the networth requirement to allow investment bankers and stock brokers to carry out underwriting activities.

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