For big companies in India, the path to listing on the stock exchange is now easier than ever. By amending the rules governing IPOs (Initial Public Offerings), the government has allowed companies—those whose market capitalization exceeds ₹5 lakh crore after listing—to offer only 2.5 per cent of their paid-up capital to the general public. Earlier, many big companies had to face difficulties in launching their public issues. Come, let us know about the special changes made under these new rules.
Main changes made
1. Under the new rules, companies will have to reserve at least 2.5 percent of each category of their equity shares for common investors. Additionally, the government has set a specific timeline for gradually increasing public shareholding, with the aim of increasing investor participation in the market.
2. According to the new rules, if the public shareholding of a company is less than 15 percent at the time of listing, then it will have to increase this stake to 15 percent within five years and to 25 percent within ten years.
On the contrary, for companies whose public shareholding is more than 15 percent at the time of their IPO, it is necessary for them to increase this figure to 25 percent within the next five years.
3. The government has made different rules regarding public shareholding depending on the market capitalization of the company. Companies with market capitalization between ₹1 lakh crore and ₹5 lakh crore will have to offer at least 2.75 per cent of their shares to general investors during their IPO.
4. For smaller companies, the prescribed percentage of public shareholding has been fixed at a higher level. For example, companies with market capitalization between ₹50,000 crore and ₹1 lakh crore will have to issue at least 8 per cent of their shares to the general public, to ensure continued participation of investors in the market. 5. There is also a condition in the new rules that if a company has equity shares with Superior Voting Rights (SVR) and it wants to list its ordinary shares in the stock exchange, then it will be mandatory to list such SVR shares also.
Path cleared for NSE and Reliance Jio
The government has officially implemented these new rules. Market experts familiar with the matter believe that after this decision, the chances of many big companies launching their IPOs will increase. In particular, the path to listing in the stock market has become much easier for companies like National Stock Exchange (NSE) and Reliance Jio.