IMPORTANT JARGON

On 12th September, SEBI proposed a number of important changes. These changes relate to Initial Public Offerings (IPOs) and Foreign Portfolio Investors (FPIs), among other proposals. While the former will encourage large issuers to pursue listings in India, the latter will strengthen India's attractiveness for FPIs.

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Q. What Is The SEBI's Announcement On IPOs?

SEBI, has proposed relaxed norms for large issuers that want to tap the Indian market. It has lowered the Minimum Public Offer (MPO) requirement in an IPO while extending the timeline for meeting the Minimum Public Shareholding (MPS) requirement for such large issuers.

Q. What Is The Minimum Public Offer (MPO) Requirement In An IPO?

According to IPO rules, a company needs to offer the public a minimum number of shares in an IPO. It is calculated as a percentage of the post-listing market capitalization (number of outstanding shares multiplied by the IPO offer price) of the company. This ensures a minimum float is available for trading in the secondary market. Also, shares are not cornered by a few investors, thus making them less susceptible to manipulation.

Q. What Is the Minimum Public Shareholding Requirement Post-IPO?

After an IPO, the company has to ensure that a specific level of shares remains with the public post-listing. The current norm for smaller companies is to have an MPS of 25%, which must be achieved within 3 years from the date of listing. For larger companies, an MPS of 10% needs to be achieved within 2 years and 25% within 5 years from the date of listing.

Q. So, What Challenges Do Large Issuers Face With MPO and MPS?