Bharat’s Securities and Exchange Board of India (SEBI) has announced significant reforms aimed at making it easier for companies to raise funds through initial public offerings (IPOs). These changes, revealed on Friday, March 15, are designed to streamline the IPO process and create a more favorable environment for companies seeking to raise capital from the public.
Reduction in Security Deposit Requirement
One of the key changes introduced by SEBI is the elimination of the requirement for companies to deposit a security amount equivalent to 1% of the total issue size for public offerings of equity shares. This change removes a significant financial barrier for companies looking to initiate public offerings, making the process more accessible and less financially burdensome.
Relaxation of Minimum Promoters’ Contribution Norms
SEBI has also relaxed the norms surrounding minimum promoters’ contribution (MPC). Under the new regulations, promoter group entities and non-individual shareholders holding over 5% of the post-offer equity share capital can contribute to MPC without being classified as promoters. This change provides more flexibility for companies in meeting MPC requirements.
Lock-In Period Revision
Currently, a 20% stake is locked in for 18 months. SEBI has decided to count the stake owned by large shareholders (those who own more than 5% stake) along with that of the promoters for this calculation. Additionally, shares resulting from the conversion of compulsorily convertible securities held for at least a year before filing the Draft Red Herring Prospectus (DRHP) will now be considered for meeting the MPC requirement, further easing restrictions on stakeholder equity.
Simplification of Offer for Sale (OFS) Process
SEBI has simplified the process for adjusting the size of the offer for sale (OFS). Any increase or decrease in the OFS size must now be based on either the issue size in rupees or the number of shares disclosed in the draft offer document. This simplification provides greater clarity and transparency in the OFS process, benefiting both companies and investors.
Flexibility in Bid/Offer Closing Date Extension
Furthermore, SEBI has introduced flexibility in extending the bid/offer closing date in case of force majeure events. Previously, a minimum of three days was required to extend the closing date, but now, only one additional day is necessary. This change grants companies more flexibility in managing unforeseen events during the IPO process, ensuring smoother operations.
In summary, these reforms by SEBI represent a significant step towards simplifying the IPO process in Bharat, making it more accessible and investor-friendly. By reducing financial barriers, easing restrictions, and providing greater flexibility, SEBI aims to foster a more vibrant and dynamic capital market environment in the country.
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