Why in the News?
SEBI has released a consultation paper proposing changes in Minimum Public Shareholding (MPS) and Minimum Public Offer (MPO) norms for listed companies.
What is Minimum Public Offer (MPO)?
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What is Minimum Public Shareholding (MPS)?
- Concept: A company is like a cake. Promoters (founders/owners) usually keep most of it, but SEBI mandates at least 25% must be shared/sold with the public.
- Purpose:
- Broader ownership and participation.
- Fairer prices by reducing manipulation.
- Greater accountability of companies.
What SEBI is proposing?
- Flexibility: Large companies find it difficult to release big chunks of shares at once; rules will be eased.
- Extended Timelines:
- Companies valued at ₹50,000–1,00,000 crore now get up to 10 years (instead of 5) to meet 25% MPS.
- They must reach 15% in 5 years first, then 25% in 10 years.
- Reduced Burden: For very large companies, the initial Minimum Public Offer (MPO) will be lowered.
Significance of the Move:
- Market Stability: Selling too many shares too quickly is like flooding the market — prices may fall even if the company is strong.
- Benefits:
- More big companies will list in India.
- Investors can enter gradually without sudden shocks.
- Encourages fund-raising while maintaining fair trading.
| [UPSC 2024] Consider the following statements:
I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom. II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time. III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard. Which of the statements given above are correct?” Options: (a) I and II only * (b) II and III only (c) I and III only (d) I, II and III |
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