The Securities and Exchange Board of India (Sebi) in February made major changes in the norms for initial public offerings (IPOs) to allow a smaller float for large issues paving way for big-ticket companies to get listing without squeezing out the liquidity from the market.
Experts are of the view that the change in norms, including amendments to underwriting provisions and portfolio management rules, is expected to help large companies.
The new norms are expected to be a boost for large issues like Life Insurance Corporation and tech-based companies which may come later this year. E-companies like Zomato, Policy Bazaar, Flipkart, Ola, Paytm could be in the queue to list in the market, they say.
“New IPO rule will help big-ticket IPOs like LIC to go through smoothly. Existing norm of 10% minimum dilution of post-issue capital might have been challenging to raise huge sum at one go,” Binod Modi, Head - Strategy at Reliance Securities told Moneycontrol.
Under the prevailing IPO norms, if the post-issue capitalisation is more than Rs 4,000 crore, the dilution requirement is 10 percent. For Rs 1,600 crore to Rs 4,000 crore, it is Rs 400 crore, and for smaller IPOs, it is 25 percent.
At a board meeting chaired by Finance Minister Nirmala Sitharaman, the regulator has approved a five percent dilution requirement, compared to 10 percent at present. In the first SEBI board meeting since the Union budget, the board has made it easier for bigger issues to be listed on the exchanges by reducing the dilution requirement from a post-issue capitalisation perspective.
“The new norms are definitely pro large companies like LIC as it helps them come to the markets in tranches to raise money from investors, thus preventing larger liquidity to be sucked out from secondary markets in one go. In the past, large issues such as Coal India had caused a liquidity squeeze in secondary markets. Therefore, this new rule could be beneficial in that sense,” Nirali Shah, Head - Equity Research, Samco Securities told Moneycontrol.
“The e-commerce theme has gained good traction in the past year due to work from home and the boom in the tech cycle, hence, we feel companies like Zomato, Policy Bazaar, Flipkart, Ola, Paytm could be in the queue to list in the market, supported by positive market sentiments and ease of listing norms by SEBI,” she said.
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