Paving ability for LIC IPO: Minimum public offer norms eased for mountainous cos

Written by Khushboo Narayan
| Unique Delhi |



February 18, 2021 3: 09: 02 am





Finance Minister Nirmala Sitharaman addresses the Sebi board. (Sebi)

The Securities and Commerce Board of India (Sebi) on Wednesday allowed mountainous companies promoting shares to the public for the first time to present a smaller share of their stock in initial public offerings (IPOs). This could occasionally even give such companies past frequent time to create the minimum public shareholding norm of 25 per cent. This paves the ability for the government to divest a stake in Life Insurance Corporation of India (LIC) with out flooding the market with the behemoth’s shares.

In its board assembly Wednesday, chaired by Finance Minister Nirmala Sitharaman, the capital markets regulator relaxed the foundations for the minimum public offer companies ought to invent after they hit the market. The foundations are encoded in the Securities Contracts (Regulation) Principles, 1957 (SCRR) which is ready to be modified.

Most standard principles stipulate that any issuer whose put up-enlighten market capitalisation is at the least Rs 4,000 crore has to present at the least 10 per cent of its stock to the public. Now, the Sebi has proposed that mountainous issuers — outlined as these with put up-enlighten market capitalisation of at the least Rs 1 lakh crore — need most tantalizing invent a minimum public offer of Rs 10,000 crore plus 5 per cent of incremental quantity of put up-enlighten market capital exceeding Rs 1 lakh crore.

As an instance, if a company is anticipated to possess a market capitalisation of Rs 3 lakh crore, it could perhaps perhaps perhaps ought to invent a minimum offer of Rs 30,000 crore price of shares in its IPO below recent principles.

Below the unique rule, this could perhaps perhaps be most tantalizing Rs 20,000 crore (Rs 10,000 crore + 5 per cent of Rs 2 lakh crore).

Additional, recent principles express that companies going for an IPO ought to create a minimum public shareholding of at the least 25 per cent inside three years of the date of list. Below the unique principles, mountainous listers ought to create at the least 10 per cent public shareholding in two years and at the least 25 per cent inside five years from the date of list.

These modifications will guarantee that there's rarely this sort of thing as a oversupply of LIC shares when it hits the market. The express-owned insurer’s market capitalisation has been estimated at Rs 10-15 lakh crore and even a 10 per cent minimum public offer ability shares price Rs 1 lakh to Rs 1.5 lakh crore being equipped. When in contrast, all Indian companies set together raised Rs 1.7 lakh crore from public equity markets in 2020, according to Top Database files.

At the board assembly, Sitharaman also careworn out upon the “need for timely implementation of the Rate range bulletins referring to to capital market,” a Sebi commentary acknowledged. She also liked the measures taken by Sebi for the length of the year, especially these referring to to going throughout the Covid-19 enviornment, it added.

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