- Current rules mean that if you are valued at less than Rs. 4,000 cr. , the company must divest 25% minimum in the IPO
- If you’re valued at 4000 cr. or more you can sell only 10% of your shares in the IPO, and you are given some time to go to 25% (which is the minimum public shareholding)
- Recent IPOs - in fact, most definitely a reference to Just Dial, which had a Rs. 3,800 cr. valuation - have been subject to gaming, where companies try hard to demonstrate a 4,000 cr. valuation so they can divest less.
- SEBI’s going to change that entirely because such thresholds make no sense. It doesn’t make sense that a company valued at 4000 cr. can have a 400 cr. IPO (10%) while a 3,999 cr. valuation would mean it has to do a 1,000 cr. IPO.
- Additionally, government owned companies have a lower public shareholding limit of 10%. Having different rules based on ownership makes no sense. So they are likely to address this too.
SEBI For IPO Reform, Might Remove Barriers to Lower IPO Dilution
SEBI will rejig IPO regulations because the current rules are likely to get gamed, said the SEBI Chief UK Sinha. A quick background: