India's market regulator, the
Securities and Exchange Board of India (SEBI), on Friday (March 15), announced major reforms to simplify the process for companies seeking initial public offerings (IPOs) or fundraising. These changes aim to streamline the IPO process and make it more conducive for companies to raise funds from the public.
One of the key changes introduced by SEBI is the reduction of the security deposit requirement for public offerings of equity shares. Previously, companies were required to deposit a security amount equivalent to 1% of the total issue size. However, this requirement has now been done away with, making it easier for companies to initiate public offerings.
SEBI has also relaxed the norms for minimum promoters' contribution (MPC), allowing promoter group entities and non-individual shareholders holding over 5% of the post-offer equity share capital to contribute to MPC without being classified as promoters.
Currently, a 20% stake is locked in for 18 months. For this calculation, SEBI has decided to count the stake owned by large shareholders (those who own more than 5% stake) along with that of the promoters. Even shares that have been converted from other securities like warrants will be counted as locked-in stakes.
Additionally, equity shares resulting from the conversion of compulsorily convertible securities held for at least a year before filing the Draft Red Herring Prospectus (DRHP) will now be considered for meeting the MPC requirement.
The regulator also simplified the process for adjusting the size of the offer for sale (OFS), specifying that any increase or decrease in the OFS size must be based on either the issue size in rupees or the number of shares disclosed in the draft offer document.
Furthermore, SEBI has introduced flexibility in extending the bid/offer closing date in case of force majeure events. Previously, a minimum of three days was required to extend the closing date, but now, only one additional day is necessary. This change provides companies with more flexibility in managing unforeseen events during the IPO process.
