Move will help LIC IPO, push disinvestment
The Finance Ministry has notified the relaxed minimum public offer norms for large companies planning to enter the stock market. This is mainly intended to facilitate the Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC). This is also likely to push disinvestment of bigger Central Public Sector Undertakings.
According to the notification issued by the Economic Affairs Department, for any company planning to get its shares listed on a stock exchange, the minimum offer and allotment to public in terms of an offer document shall be “at least such percentage of each class or kind of equity shares or debentures convertible into equity shares issued by the company equivalent to the value of five thousand crore rupees and at least five per cent of each such class or kind of equity shares or debenture convertible into equity shares issued by the company, if the post issue capital of the company calculated at offer price is above one lakh crore rupees.”
Also, based on the size of post-issue market capitalisation, companies have been divided into two categories — one with more than ₹4,000 crore but up to ₹1-lakh crore and the other, with over ₹1- lakh crore. For the first category, the minimum public offer size should be at least 10 per cent of post-market offer capital while for the second category it will be ₹5,000 crore plus 5 per cent of incremental capital amount beyond ₹1- lakh crore. The issuer will be required to achieve at least 10 per cent public shareholding in two years and at least 25 per cent in five years from the date of listing.
The norms now notified are in variance with the levels recommended by SEBI in February. The regulator had recommended the threshold at ₹10,000 crore plus 5 per cent of the incremental amount for companies with post listing market capitalisation beyond ₹1-lakh crore.
The notification also modified norms for listed companies going for IBC resolution. Accordingly, such a company, post implementation of resolution plan, will have 12 months (from 18 months now) to achieve minimum public shareholding of 10 per cent. Also, it will have to maintain at least 5 per cent public shareholding.