The regulator eased initial public offering (IPO) issue sizes for large Indian companies to strengthen an already impressive pipeline of share sales that could hit a record this year.
At its board meeting on Friday, Sebi decided to allocate a quota to insurance companies and pension funds in the anchor books of IPOs, while reducing the minimum investment limit in long-value private equity (PE) funds to boost investor participation, among several steps to bolster the capital markets.
The regulator said sovereign wealth funds and overseas retail funds will be able to access domestic markets via an automatic window. This single clearance window enables simplified registration across multiple investment routes and reduced compliance requirements. As per Sebi’s assessment, this rule will cover 70% of 11,913 registered FPIs.
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Going Public, Seamlessly
These manage assets worth Rs 81 lakh crore in the country.ET reported on September 8 that the board would be considering these and other measures.The regulator reduced the minimum stake sale via an IPO to 2.5%, from 5%, for companies with a post-issue market capitalisation exceeding Rs 5 lakh crore. This will help listing-bound companies such as Jio Platforms and the National Stock Exchange (NSE). It also relaxed the timeline to meet minimum public holding norms.
“This will pave the way for larger unlisted companies to become public more seamlessly,” said Arka Mookerjee, partner, JSA Advocates & Solicitors. “Most importantly, Sebi has adopted a multi-pronged approach to increasing institutional participation in IPOs, with public shareholding threshold relaxations, additional QIB (qualified institutional buyer) participation and increasing timeline for compliance.”
The regulator will recommend to the finance ministry that the Securities Contracts (Regulation) Rule be amended to provide flexibility to large issuers.
Sebi also lowered the minimum investment threshold for large value PEs to ₹25 crore, from the current ₹70 crore. This is aimed at broadening the investor base and to facilitate fund raising by PEs and other alternative investment funds (AIF).
It also proposed to introduce a separate type of AIF scheme for sophisticated investors aware of risks and returns associated with such products.
“This should attract more fund managers to launch large-value funds, which are subject to the most light-touch regulatory regime among different categories and kinds of AIFs,” said Tejesh Chitlangi, managing partner, IC RegFin Legal.
The regulator announced simpler disclosures requirements for smaller related party transactions (RPTs). It introduced scale-based thresholds based on annual consolidated turnover of the listed entity for determining material RPTs. “With the introduction of enhanced materiality thresholds, the number of related party transactions resolutions requiring member approval will reduce significantly, aligning regulatory focus on transactions of real substance,” said Makarand Joshi, founder partner, MMJC and Associates, a corporate compliance firm. Further, Sebi has revised thresholds for approval by audit committees of RPTs undertaken by subsidiaries. “This is a relief for fast-growing groups and brings particular ease for subsidiaries without lengthy operational records, who now benefit from clearer compliance processes,” Joshi said.
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