In a potential game-changer for India’s corporate landscape, SEBI expert committee has laid out a series of recommendations to facilitate a smoother journey for companies looking to go public. These proposals, outlined below, touch upon crucial aspects ranging from altering issue sizes to extending IPO periods. The committee’s forward-thinking approach aims to bring unprecedented flexibility and options for companies that want to go for IPO.
Here are the important recommendations by the SEBI panel and how they will impact companies and investors:
Flexibility in Altering Issue Size:
- The expert committee suggests providing companies with more flexibility to modify the issue size after submitting the offer document.
Effect: This move provides companies with increased adaptability, allowing them to align the issue size more closely with market dynamics and investor demand. It ensures that companies can optimize their fundraising strategies based on real-time conditions. On the other hand Investors benefit from this flexibility as it reduces the likelihood of companies overcommitting or underestimating their capital needs. It fosters a more dynamic approach, potentially attracting a broader investor base by tailoring offerings to market conditions.
Promoters’ Contribution Post-Listing:
Currently, companies need to maintain at least 20% of their post-offer equity share capital as Minimum Promoters’ Contribution (MPC) to ensure promoters retain a stake in the game after raising funds from the public.
- The committee recommends additional avenues for maintaining the mandatory 20% minimum promoters’ contribution after listing.
- Proposes the inclusion of non-individual shareholders in the 20% promoters’ contribution without being identified as promoters.
Effect: Offering additional avenues for maintaining the mandatory 20% minimum promoters’ contribution allows companies to diversify their ownership structures post-listing. This can enhance corporate governance and attract a more diverse set of investors. Also the inclusion of non-individual shareholders in the 20% promoters’ contribution promotes transparency and can mitigate risks associated with concentrated ownership. This change may instill greater confidence in investors regarding the long-term commitment of promoters.
Extension of IPO Period:
- Suggests allowing companies to extend the IPO period by just one day in case of force majeure events, such as a banking strike, as opposed to the current compulsory three days.
Effect: Allowing companies to extend the IPO period by one day during force majeure events enhances their ability to navigate unforeseen circumstances. It provides a more realistic timeframe for completing the IPO process, reducing pressure on companies as well as Investors.
Listing and Disclosure Changes:
The committee proposes changes in both listing and disclosure requirements to streamline and simplify the compliance burden.
Effect: Streamlining and simplifying listing and disclosure requirements reduce the compliance burden for companies. This encourages more companies to consider going public, fostering a healthier IPO environment. Simplified listing and disclosure requirements enhance transparency and make it easier for investors to analyze and assess potential investments. This can attract more investors to the market and improve overall market efficiency.
- Inclusion of compulsory convertible securities and depository receipts for the 20% promoters’ contribution.
Effect: Inclusion of compulsory convertible securities and depository receipts for the 20% promoters’ contribution provides companies with additional financial instruments, potentially enhancing their capital-raising capabilities.
- Change in the calculation of market capitalization ranking to a six-month average instead of the March 31 cut-off.
Effect: The adjustment in market capitalization ranking calculation contributes to a more responsive and reflective market environment, allowing investors to make more informed decisions based on current market dynamics.
This set of recommendations is aimed at simplifying and easing the compliance burden for companies planning to go public, providing them with more options and flexibility throughout the IPO process.