Blitz Bureau
NEW DELHI: The Securities and Exchange Board of India (Sebi) has unveiled a major proposal to overhaul rules governing large-scale initial public offerings (IPOs). Seeking to ease execution risks and attract mega listings, the regulator has suggested a new five-slab framework for minimum public offers, coupled with extended timelines for companies to meet public shareholding requirements.
The consultation paper, released on August 18, is open for public comments until September 8. If cleared, the move could pave the way for India’s largest corporates and state-owned enterprises to list domestically under more flexible norms.
Under the proposed system, IPO thresholds will be split into five distinct market-cap bands, replacing the current one-size-fits-all model for companies above ₹1 trillion. For firms with a post-issue valuation of ₹50,000 crore-₹1 trillion, the minimum public offer (MPO) would be set at ₹1,000 crore and at least 8 per cent of post-issue equity.
For issuers in the ₹1-₹5 trillion band, the MPO would rise to ₹6,250 crore with a minimum dilution of 2.75 per cent. Companies valued above ₹5 trillion would need to offer at least ₹15,000 crore worth of shares, alongside a minimum 1 per cent dilution, with a hard floor of 2.5 per cent.
Relaxed timelines
Sebi has also proposed easing timelines for achieving minimum public shareholding (MPS). Companies in the ₹50,000 crore-₹1 trillion bracket would now get five years — up from three — to reach 25 per cent public ownership. For issuers above ₹1 trillion, if the free float at listing is under 15 per cent, they would need to meet that threshold within five years and 25 per cent within ten years. Where the float is already above 15 per cent at listing, the 25 per cent requirement must be met within five years.
The regulator explained that very large issues are difficult for the market to absorb at once. Forcing rapid follow-on dilution, Sebi noted, often creates an overhang that drags down share prices — even for fundamentally strong companies.
Retail participation retained
In a key departure from its July 31 draft, Sebi has dropped its earlier proposal to reduce the retail quota in mega IPOs from 35 per cent to 25 per cent. The latest paper retains the 35 per cent allocation for retail investors, a move widely seen as strengthening retail participation in India’s vibrant IPO market.
India’s IPO market remains one of the most active globally. More than 100 IPOs were launched in the first half of 2025, according to EY Global IPO Trends. The average mainboard IPO size has risen to ₹2,057 crore in FY25, compared with ₹1,488 crore in FY20, reflecting steady growth in deal size.
Despite this surge, mega listings remain rare. The ₹21,000 crore LIC IPO in 2022, which sold just 3.5 per cent equity, highlighted the difficulty of executing massive offerings without overwhelming investor appetite. The new framework is designed to make such transactions more manageable, while still ensuring sufficient float for market discovery.
Market experts believe the changes will particularly benefit large conglomerates and public sector undertakings planning strategic divestments. However, analysts caution that thinner floats of 2.5-8 per cent in the initial years could affect liquidity, making institutional participation and anchor support critical.