IPO ISSUE

Subject : Economics

Context : SEBI moots easier dilution norms for large IPO issues.

Concept :

• Markets regulator SEBI on Friday proposed to reduce the minimum offer size in an initial share sale, whereby companies with a post-issue capital of above ₹10,000 crore would be required to offer at least 5% stake in IPO.
• At present, all companies with a post-issue capital above ₹4,000 crore are compulsorily required to dilute at least 10% shareholding in an initial public offering (IPO).
• SEBI said there could be a scenario where large issuers may not be compliant with 10% minimum public shareholding (MPS) at the time of listing.
• Accordingly, the regulator recommended that MPS of 10% should be achieved in 18 months by such issuers and 25% within 3 years from the date of listing.

Initial Public Offering

• IPO is the selling of securities to the public in the primary market.
• Primary market deals with new securities being issued for the first time. It is also known as the new issues market.
• It is different from secondary market where existing securities are bought and sold. It is also known as the stock market or stock exchange.
• It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.
• Unlisted companies are companies that are not listed on the stock exchange.
• It is generally used by new and medium-sized firms that are looking for funds to grow and expand their business.