SEBI relaxes minimum public offer norms to facilitate large issues

Our Bureau New Delhi | Updated on February 17, 2021 Published on February 17, 2021

Ajay Tyagi, Chairman, SEBI   -  PTI

Move with an eye on upcoming LIC IPO and to push disinvestment

Capital market regulator SEBI on Wednesday relaxed the Minimum Public Offer (MPO) requirement for large issuers, paving the way for the smooth launch of impending large initial public offering like that of Life Insurance Corporation (LIC).

At its Board meeting at North Block in the Capital, the SEBI Board decided to recommend changes to the securities contracts regulation rules for issuers with post issue market capitalisation exceeding ₹1,00,000 crore. The requirement of MPO for such issuers will be reduced from 10 per cent of post issue market capitalisation (existing provision) to ₹10,000 crore plus 5 per cent of the incremental amount beyond ₹1,00,000 crore, SEBI Board has decided.

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, SEBI Chairman Ajay Tyagi said after the meeting.

Currently, the Securities Contracts (Regulation) Rules, 1957 (SCRR) stipulates that issuers with post issue market capitalisation of at least ₹4,000 crore or more must offer to public at least 10 per cent of their post issue market capitalisation. Further, such issuers are also required to achieve a minimum public shareholding (MPS) of at least 25 per cent within three years from the date of listing.

“The relaxation we are now bringing to the minimum public offer will aid large IPO issuers,” Tyagi told BusinessLine when asked if this move was intended to facilitate the upcoming IPO of insurance behemoth LIC.

‘Will boost divestment’

Capital market observers said that the latest SEBI move will give a boost to the divestment programme of the government, which is looking to mop up ₹1.75 lakh crore next fiscal as divestment receipts.

It maybe recalled that Finance Minister Nirmala Sitharaman had in her recent budget speech highlighted that LIC’s IPO would hit the market in 2021-22.

Already, the government has, through the Finance Bill 2021, introduced changes to the LIC Act to fast-track the IPO. Besides looking to divest up to 10 per cent in LIC, the government has also proposed changes in law to the effect that its holding in LIC will not come below 75 per cent in the insurance major in the first five years, and not below 51 per cent after that. The government is also looking to make a huge reservation for policyholders in the upcoming LIC IPO.

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Published on February 17, 2021
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