Given the rising number of large-sized IPOs in the Indian capital market, SEBI released a consultation paper on August 18, 2025, proposing amendments to the Minimum Public Offer (MPO) and Minimum Public Shareholding (MPS) requirements. This move will bring relief to large companies planning to list on Indian stock exchanges but facing challenges due to the current rules.
Let’s understand what exactly SEBI’s new proposal is and what these changes mean for IPO investors.
What’s Happening?
As per the current rules, if a company’s post-issue market capitalisation exceeds Rs 1,00,000 crore, it must offer at least Rs 5,000 crore and a minimum of 5% as a public offer. Additionally, within two years of listing, the company must achieve 10% public shareholding, and within five years, 25%.
According to SEBI, immediate dilution of such a large stake is difficult for the market to absorb. For example, if a company’s post-issue market capitalisation is Rs 10,00,000 crore, then under the existing rules, it would be required to issue Rs 55,000 crore (Rs 5,000 crore + 5% of Rs 10,00,000 crore) to the public. This may not only exceed market absorption capacity but also dampen investor demand and sentiment.
Rising Trend in Large IPOs
Looking at the data from 2019-20 to 2024-25, the IPO market shows a clear upward trend. While there were only 14 IPOs in 2019-20 that raised Rs 20,827 crore, the number rose to 79 in 2024-25, raising Rs 1,62,517 crore.
SEBI also analysed 15 large companies that listed after January 1, 2020, and offered less than 25% public shareholding. These included LIC India (3.5%), Hyundai (17.5%), Bajaj Housing Finance (11.3%), and NTPC Green Energy (10.9%). Interestingly, the number of public shareholders in these companies was still quite large. For instance, LIC India had around 37.9 lakh investors in the first quarter after its listing.
This shows that liquidity is maintained even with smaller public offerings. In fact, the median public shareholder base of these companies stood at 7.74 lakh, almost the same as the median of Nifty 100 companies at 7.07 lakh.
SEBI’s New Proposal
SEBI has proposed creating new categories based on market capitalisation. Currently, there is a single category for companies with a market cap between Rs 4,000 crore and Rs 1,00,000 crore.
For MPS timelines, SEBI has proposed a new formula. If public shareholding at the time of listing is less than 15%, the company must achieve 15% within 5 years and 25% within 10 years. If public shareholding is more than 15% at listing, then 25% must be achieved within 5 years.
What’s in it for Investors?
For investors, this proposal could bring mixed results. On one hand, easier listings for large companies will provide more investment opportunities. On the other, lower dilution means fewer shares will be available in the market initially.
SEBI argues that even with a 2.5% dilution in a company with a Rs 10,00,000 crore market cap, the offer size would still be Rs 25,000 crore. At a share price of Rs 500, this translates into 50 crore shares, much higher than the average free float of Nifty 50 companies.
Currently, the minimum free float in Nifty 50 companies is around 5 crore shares, while the median is 116 crore. Hence, liquidity should not be a concern.
The proposal also suggests maintaining the retail quota at 35%, in the interest of small investors. Earlier, SEBI had considered reducing this to 25% for IPOs above Rs 5,000 crore, but it has now recommended keeping it unchanged at 35%.
What’s Next?
SEBI’s proposal is an important step for the Indian capital market. It has invited public suggestions until September 8, 2025, after which SEBI will finalise the rules.
If implemented, the new framework will also benefit already listed companies that have not yet met the MPS requirements. They will get the advantage of an extended timeline, though any penalties already imposed will continue to apply.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
