Sebi panel bats for easier listing norms

Jan 11, 2024

In a 3-page consultation paper floated, the expert committee proposed to allow certain public investors to contribute towards minimum public shareholding without being classified as a promoter

An expert committee formed by markets regulator the Securities and Exchange Board of India (Sebi) to improve ease of doing business for listed companies has recommended interim measures on Thursday. In a 3-page consultation paper floated, the expert committee proposed to allow certain public investors to contribute towards minimum public shareholding (MPS) without being classified as a promoter.

The committee has also recommended easing of conditions that trigger refiling of initial public offering (IPO) documents by companies looking to list and leeway in terms of timeline for companies to fill up vacancies of key managerial persons among others.

Sebi rules say, promoters of a company need to hold at least 20% of shareholding in the company post listing. However, often there are situations where companies have raised several rounds of funding prior to listing and hence promoters already own less than 20%. In such scenarios until now, certain financial institutions like banks, insurance companies and private equity firms were permitted to contribute towards the 20% limit. Now, Sebi committee has proposed to allow even certain non-individual shareholders to contribute towards this limit without being identified as a promoter.

“Non-individual shareholder that would hold 5% or more of the post-offer equity share capital may be permitted to contribute towards the shortfall in MPC, subject to the existing maximum of 10%, without being identified as a promoter." Sebi expert panel said.

Current IPO rules mandate companies to refile offer documents if the company revises the fresh issue limit up or down 20%. The calculation is done based on estimated issue size that companies disclose in their offer document. Now, Sebi has proposed to ease the criteria.

“In order to provide ease of doing business and to provide greater flexibility, the offer for sale size can be based on either the estimated issue size (in Rupee value) or the number of shares, as disclosed in the DRHP, and not on both criteria." Sebi committee said.

Market participants can send their responses on the consultation paper by 1 February.

[Mint]