India Eases Public Shareholding Requirements for Large Companies

The government has eased the public shareholding requirements for big companies, paving the way for the public listings of Reliance's telecom arm Jio and stock exchange NSE. In a notification, the Union Ministry of Finance notified amendments in the Securities Contracts (Regulation) Rules that regulated the listing and public shareholding norms based on the market capitalisation of the companies. The amendments follow the proposals made by the securities markets regulator Sebi (Securities and Exchange Board of India) last year. The Sebi proposal suggested a tiered approach based on the valuation of the company. After the amendments, companies with post-IPO market valuations of more than Rs 5 lakh crore (about $57 billion) will now be allowed to list with an initial public float of just 2.5 percent of their paid-up capital. Such firms will now be required to gradually increase their public shareholding over time, reaching 15 percent within five years and the mandatory 25 percent within ten years. For companies valued between Rs 1 lakh crore and Rs 5 lakh crore, the minimum public float requirement has been set at 2.75 percent, with a five-year window to reach the 25 percent public shareholding threshold. Companies with valuations ranging from Rs 50,000 crore to Rs 1 lakh crore will be required to float 8 percent of their equity at the time of listing, while also being given five years to reach the 25 percent public shareholding norm. For smaller companies with valuations up to Rs 1,600 crore, the standard rule continues to apply: a 25 percent public float at the time of listing. Earlier, companies with post-IPO market valuations of over Rs 1 lakh crore were required to list with an initial public float of at least 5 percent. Due to this requirement, large IPOs had to sell large volumes of shares which could impact liquidity in the market. Also, big companies were wary of how that huge fundraising from the market would be used in the business. Hence, companies like Jio and NSE had deferred their public listing to wait for the norms to change.