Listed firms with a market capitalisation of over Rs 1 lakh crore will get more flexibility in maintaining their prescribed minimum public shareholding.
This came after the finance ministry notified amendments to the securities contracts rules on Friday, in line with a decision by capital markets regulator, the Securities and Exchange Board of India (Sebi), earlier.
The Department of Economic Affairs has stipulated a minimum offer size of at least Rs 5,000 crore or 5% of issued capital “if the post-issue capital of the company calculated at offer price is above one lakh crore rupees,” according to the notification.
Firms falling in this category would have to increase public shareholding to 10% within two years from listing such securities and further to 25% within a period of five years from the date of listing, it said.
The earlier timeline to reach the 25% mark was three years for firms with a market cap of up to Rs 1 lakh crore.
“These changes have been made to accommodate large companies that want to raise capital since the earlier rules acted as a hindrance,” said Sandip Khetan, partner, EY India.
Experts said the notification could have also been prompted by the fact that firms coming out with initial public offerings, such as Paytm or state-owned insurer Life Insurance Corporation of India, could be valued at over Rs 1 lakh crore.
“This provides flexibility from the previous minimum public offering of 10% of post issue market cap for firms with a market cap of over Rs 4,000 crore,” said independent securities law expert Deepika Vijay Sawhney.
According to the notification, listed firms that have gone through successful insolvency resolution under the Insolvency and Bankruptcy Code (IBC) should have a minimum public shareholding of 5%.
This indirectly amounts to putting a condition on resolution plans, experts said.
“…every listed company shall maintain public shareholding of at least 5% as a result of implementation of the resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code,” the notification said.
Further, in case a listed firm’s shareholding falls below 10% because of the implementation of a corporate insolvency resolution plan under the IBC, the firm will have to bring it back to 10% within 12 months from the date it fell below the threshold, from the earlier timeline of 18 months.