India's IPO boom is hitting the speed limits

Tata Capital

24/10/2025 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Oct 24 (Reuters Breakingviews) - India's largest companies are struggling to fit in, quite literally. Officials are easing rules on minimum free floats and offer sizes to smooth the way for big initial public offerings. It bridges a gap between a requirement for capital formation and what the market can absorb, but it comes at a cost to governance.

The Securities and Exchange Board of India last month said issuers valued at more than 5 trillion rupees ($56.8 billion) can offer stock worth as little as 150 billion rupees ($1.7 billion) in their public debuts and 1% of their post-issue market capitalisation, down from 5% earlier. It also gave issuers up to 10 years to raise their minimum public shareholding to 25%, effectively doubling the previous timeline.

Reliance Industries' RELI.NS telecom unit Jio and the National Stock Exchange, both in the queue to list, will be among the top beneficiaries. It extends to them what was originally an exemption granted to Life Insurance Corporation LIFI.NS for the state-controlled giant's bumper $2.7 billion listing in 2022.

The changes come at a time India's primary market is booming. One-billion-dollar plus offerings like those this month by LG Electronics India LGEL.NS and shadow lender Tata Capital TATC.NS are increasingly frequent. With IPOs worth $16 billion this year, per Dealogic, India is the world's third largest market for debuts and issuance is poised to exceed last year's record; Citigroup expects IPO volumes to hit up to $20 billion through the next 12 months.

Yet despite annual net inflows into the stock market of over $80 billion from domestic institutions and individuals, there is a lack of confidence among officials, issuers and bankers on the market's ability to absorb larger deals; Hyundai Motor India's HYUN.NS 279 billion Indian rupee ($3.18 billion at current rates) deal in 2024 is the country's largest IPO to date.

If India is loosening the rules to allow big companies to go public, it should strengthen other guardrails to protect minority investors that could be hurt by a low free float. Hong Kong-based Asian Corporate Governance Association disagreed with SEBI's proposal to extend the minimum free float timeline and recommends mandating at least 50% independent board directors for firms with a less than 25% public holding as well as time-bound roadmaps for dilution. Easier rules call for a tighter leash.

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CONTEXT NEWS

India will log $8 billion in initial public offerings during the final quarter of 2025, Reuters reported on October 1, citing investment bankers.

The Securities and Exchange Board of India on September 12 allowed companies worth at least 5 trillion rupees to offer as little as 150 billion rupees of stock to the public and at least 1% of the post issue market capitalisation, down from 5% earlier.

They will have five years to achieve a minimum public shareholding of 15% and another five years to take it to 25%, the markets regulator said. Companies of that size earlier had only five years to reach the 25% level.

Indian IPO volumes are on track to beat their 2024 record https://www.reuters.com/graphics/BRV-BRV/myvmxzrjmpr/chart.png

(Editing by Una Galani; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))