SEBI Simplifies IPO Process for Companies

New Delhi: The Securities and Exchange Board of India (SEBI) has recently revised its regulations to streamline the process for companies planning initial public offerings (IPOs). These changes aim to enhance the ease of doing business and provide greater flexibility to market participants.

Key Highlights:

1. Offer for Sale (OFS) Criteria:

• SEBI now specifies that any change in the size of an OFS will require fresh filing based on either the issue size in rupees or the number of shares. This simplification eliminates the need for dual criteria and provides clarity to companies launching IPOs.
• Promoter group entities and non-individual shareholders holding more than 5 percent of the post-offer equity share capital can contribute towards the shortfall in minimum promoters’ contribution (MPC) without being identified as promoters. This move recognizes the practical challenges faced by companies promoted by entrepreneurs during multiple rounds of financing before listing their equity shares on stock exchanges.

1. Minimum Promoter Contribution (MPC):

• The existing rule under the Issue of Capital and Disclosure Requirements (ICDR) permits certain investor categories to contribute equity shares to meet the MPC requirement. However, SEBI’s recent notification further enhances flexibility in this regard.
• Additionally, equity shares obtained through the conversion of compulsorily convertible securities held for at least one year before filing the draft red herring prospectus (DRHP) can now be considered for meeting MPC requirements. This change acknowledges the evolving landscape of fundraising and capital structures.

1. Bid Closing Date Flexibility:

• SEBI has also addressed force majeure events such as banking strikes or similar circumstances. Instead of the previous minimum three-day requirement, the bid closing date can now be extended by a minimum of one day. This adjustment ensures smoother IPO processes even in unexpected situations.

These regulatory amendments reflect SEBI’s commitment to fostering a conducive environment for companies seeking to go public. By simplifying rules and providing greater flexibility, SEBI aims to encourage more companies to access the capital markets and contribute to India’s economic growth.