SEBI Eases IPO Norms for Companies with Large Public Shareholding

The SEBI has resolved a regulatory grey area that had previously delayed Initial Public Offering(IPO) approvals for companies with a significantly large number of public shareholders. This development has enabled several high-profile firms to proceed with their initial public offerings, a move welcomed by the capital markets.

Regulatory Clarity Enables Pending IPOs

5 companies, including HDB Financial Services and Hero FinCorp, which had submitted their draft red herring prospectuses (DRHPs) last year, have recently received regulatory approval following SEBI’s clarification. As per news reports, the delay in approvals was caused by uncertainty over whether having a large number of public shareholders without prior public fundraising contravened the Companies Act.

HDB, Hero FinCorp, Vikram Solar Get SEBI Nod

As per Business Standard reports, SEBI has now clarified that merely having a high public shareholder count does not violate regulations, provided the company has not raised capital through a public offer. At the time of their DRHP filing, HDB Financial had over 41,500 public shareholders, Hero FinCorp around 7,500, and Vikram Solar about 7,000. All 3 have received Sebi approval in the past two weeks. Waaree Energies, which has recently gone public, had around 2,600 public shareholders when it filed IPO papers. Meanwhile, the National Stock Exchange, which is also planning an IPO, has seen its shareholder base rise to over 100,000 due to strong investor interest.

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Conclusion

With SEBI’s clarified approach, companies with large shareholder bases, especially those arising from ESOP conversions or private market trades, are no longer stalled at the IPO approval stage. While the regulatory position is now more settled, case-by-case evaluation will remain a key aspect of SEBI’s oversight, ensuring both compliance and transparency.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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