In a strategic move to support India’s capital markets while addressing concerns of large corporates, the Securities and Exchange Board of India (SEBI) has proposed relaxing the Minimum Public Offer (MPO) norms for very large companies launching initial public offerings (IPOs). This comes as part of SEBI’s efforts to reduce the stake dilution burden and ensure a stable listing environment, particularly for companies with extremely high market capitalizations.
Background: The Challenge of Large IPOs
Typically, Indian companies must comply with the Minimum Public Shareholding (MPS) rule, which mandates that at least 25% of a company’s shares be held by the public. While this works well for most listings, very large companies face difficulty in meeting this requirement at the time of IPO, as it could require massive share dilution in a single offering—affecting valuations and market dynamics.
SEBI’s new proposal seeks to ease this transition, providing greater flexibility while ensuring eventual compliance.
Key Proposals: A Staggered Approach Based on Market Cap
SEBI’s revised framework introduces differentiated thresholds for IPOs, depending on a company’s post-issue market capitalization:
1. Companies with Market Cap ₹50,000 Cr – ₹1 Lakh Cr
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Minimum Public Offer: ₹1,000 crore
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Post-issue capital offered: At least 8%
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Timeline for 25% MPS: 5 years
2. Companies with Market Cap ₹1 Lakh Cr – ₹5 Lakh Cr
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Minimum Public Offer: ₹6,250 crore
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Post-issue capital offered: At least 2.75%
3. Companies with Market Cap Over ₹5 Lakh Cr
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Minimum Public Offer: ₹15,000 crore
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Post-issue capital offered: At least 1%, with minimum dilution of 2.5%
This tiered mechanism prevents sudden oversupply of shares and helps maintain market stability during large-scale listings.
Retail Quota Retained at 35%
In a shift from its earlier draft proposal, SEBI has decided to retain the 35% retail investor quota in IPOs, reversing its plan to reduce it to 25% for large issuers. This decision came after market feedback emphasized the importance of retail participation, especially for public trust and inclusivity in large IPOs like LIC and Hyundai Motor India.
Why the Change Matters
The proposed relaxation achieves multiple objectives:
- Reduces pressure on promoters of large companies to offload huge stakes immediately.
- Supports fair price discovery by preventing oversupply during IPO.
- Encourages more mega-IPOs, enhancing market depth and liquidity.
- Maintains retail investor protection through a stable 35% quota.
- Aligns India’s IPO framework with global best practices for large corporations.
About SEBI
The Securities and Exchange Board of India (SEBI) is India’s regulatory body for securities and commodities markets. It operates under the Ministry of Finance, Government of India.
- Established: April 12, 1988 (executive body); statutory powers from January 30, 1992
- Headquarters: Mumbai, Maharashtra
- Current Chairman: Tuhin Kanta Pandey
SEBI plays a critical role in protecting investor interests, promoting market development, and ensuring transparency and fairness in India’s capital markets.
Recent Related Initiative
In August 2025, SEBI also launched an investor awareness campaign through All India Radio, aimed at warning the public about frauds and scams on social media platforms such as YouTube, Facebook, and WhatsApp. This underscores SEBI’s parallel focus on investor education and safety.
Why It Matters for Exams
This topic is highly relevant for aspirants preparing for UPSC, SSC, banking, and other financial sector exams. Key angles include:
- SEBI’s role as a capital markets regulator
- IPO and MPS-related reforms
- Tiered public offer structure based on market cap
- Balancing market depth with investor protection
- Examples like LIC IPO and Hyundai Motor India IPO