Govt tweaks IPO norms: What it means for big listings like NSE and Reliance Jio

NSE IPO, Reliance Jio IPO: The finance ministry has relaxed rules related to minimum public shareholding (MPS) and minimum IPO size. The move aims to make it easier for very large companies to launch IPOs. The change could benefit big IPO candidates such as Reliance Jio and National Stock Exchange.

The new framework links the minimum IPO size with a company’s post-issue market capitalisation and offers more flexibility for companies with very large valuations.

New IPO size thresholds based on market cap

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Under the revised rules, the minimum public shareholding requirement will vary depending on the company’s post-issue market capitalisation.

For companies with post-issue market capitalisation of up to Rs 1,600 crore, at least 25 per cent of shares must be offered to the public through the IPO.

For firms with market capitalisation between Rs 1,600 crore and Rs 4,000 crore, the minimum IPO size will be Rs 400 crore.

For companies with market capitalisation above Rs 4,000 crore but below Rs 1 lakh crore, the minimum public float will be Rs 1,000 crore or at least 8 per cent of equity.

For firms valued between Rs 1 lakh crore and Rs 5 lakh crore, the IPO size will need to be equivalent to Rs 6,250 crore or about 2.75 per cent of equity.

For companies with market capitalisation above Rs 5 lakh crore, the minimum public shareholding requirement will be Rs 15,000 crore or about 1 per cent of equity.

More time to meet public shareholding norms

The government has also relaxed the timeline for achieving the mandatory 25 per cent public shareholding.

Under the revised rules, companies will need to reach 15 per cent public shareholding within five years of listing and 25 per cent within ten years.

Earlier, companies were required to meet the 25 per cent public shareholding requirement within three years of listing.

Why this matters

The relaxation is expected to smooth the path for some of India’s biggest potential IPOs. Large companies with massive valuations often face difficulty meeting public float requirements in a single offering.

With lower initial float requirements and a longer timeline to increase public shareholding, mega listings such as Reliance Jio and the National Stock Exchange could find it easier to launch their IPOs.

NSE IPO Latest Update

Meanwhile, the National Stock Exchange has taken another key step towards its long-awaited IPO. The exchange has completed the selection process for merchant bankers, law firms and other intermediaries for the issue.

The development indicates that the exchange’s listing process is now moving to the next stage.

A total of 20 merchant bankers have been selected for the proposed IPO. The list includes several leading domestic and global investment banks.

Among the key merchant bankers are Kotak Mahindra Capital, JM Financial, Axis Capital, IIFL Capital Services, Motilal Oswal Investment Advisors, ICICI Securities, SBI Capital Markets and Nuvama Wealth Management.

Other names on the list include HDFC Bank, Avendus Capital, Morgan Stanley, Citigroup, J.P. Morgan, HSBC, IDBI Capital Markets, 360 ONE WAM, Anand Rathi Advisors, DAM Capital Advisors, Pantomath Capital Advisors and Equirus Capital.

Merchant bankers play a key role in managing the IPO process. They advise the company’s IPO committee on the right offer price after analysing financial performance, industry comparisons, growth trends and broader economic and geopolitical factors.

As lead managers, they handle the entire issue from pre-IPO planning to the listing of shares. They also conduct financial and legal due diligence and help prepare key documents such as the Draft Red Herring Prospectus (DRHP) and the Red Herring Prospectus (RHP).

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