Amid market volatility from geopolitical tensions, SEBI has announced one-time relaxations for listed firms. This includes relief from penalties for MPS non-compliance and extending the validity of observation letters for public issues.
The Securities and Exchange Board of India on Tuesday announced a series of one-time relaxations for listed entities and issuers in view of market volatility arising from ongoing geopolitical tensions in the Middle East.
Relaxation on Minimum Public Shareholding (MPS) Norms
In a circular, SEBI said it has provided relief from penal provisions related to non-compliance with Minimum Public Shareholding (MPS) requirements for a specified period. It stated, "it has been decided to grant one-time relaxation from the applicability of penal provisions under the Master Circular for listed entities whose due date for compliance with MPS requirements falls during the period from April 1, 2026, to September 30, 2026".
Under the existing rules outlined in the SEBI Master Circular dated July 11, 2023, listed companies failing to meet MPS norms face penalties such as fines, freezing of promoter shareholding, and other actions by stock exchanges and depositories. However, considering representations from industry bodies highlighting difficulties due to current market conditions, SEBI has decided to grant a one-time relaxation.
Further, any penalties already imposed by stock exchanges or depositories during this period for such non-compliance will be withdrawn.
Extension for Public Issues and Fundraising
In a separate move and another circular released on Tuesday, SEBI has also provided relief to companies planning to raise funds through public issues by extending the validity of its observation letters. It stated, "the prevailing uncertain market conditions due to ongoing geopolitical tensions and subdued investor participation, SEBI has decided to grant one-time relaxation to extend validity of the SEBI Observations letters, expiring between April 1, 2026 - September 30, 2026, till September 30, 2026"
As per existing regulations under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, a public issue must be launched within twelve months or eighteen months from the date of SEBI's observations.
Due to ongoing geopolitical tensions and subdued investor participation, several issuers have faced challenges in accessing capital markets, leading to delays or withdrawal of issuance plans.
To address this, SEBI has granted a one-time extension for observation letters expiring between April 1, 2026 and September 30, 2026. These will now remain valid until September 30, 2026.
Rationale and Objectives of the Relaxations
SEBI issued these relaxations to help companies deal with the current uncertain market conditions caused by geopolitical tensions, especially the West Asia conflict. Due to volatility and weak investor participation, many companies are finding it difficult to meet Minimum Public Shareholding (MPS) rules or launch their IPOs and fundraising plans on time. To reduce this pressure, SEBI has temporarily relaxed penalties for MPS non-compliance and extended the validity of its observation letters. This move is aimed at giving companies more time, avoiding unnecessary regulatory hurdles, and ensuring that capital market activities continue smoothly during this challenging period.
Minimum Public Shareholding (MPS) means listed companies must have at least 25 per cent of their shares held by the public, not promoters, to ensure transparency and fair trading. SEBI observation letters are approvals given by SEBI after reviewing a company's IPO or fundraising documents.
Both circulars have been issued with the objective of protecting investor interests and ensuring the orderly development of the securities market.
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