Definition
Minimum Promoter Contribution
Minimum promoter contribution is the share of post-IPO capital that promoters must hold and lock in, normally 20%.
SEBI ICDR Regulations require promoters to contribute at least 20% of the post-issue paid-up capital, which is then subject to lock-in. This ensures that the people running the company keep a meaningful stake after raising public money.
If promoters hold less than 20% before the issue, certain institutional investors' holdings can be counted towards the requirement in specified cases. Companies without identifiable promoters (such as some professionally managed firms) are exempt, with their pre-issue capital locked in instead.
Related terms
- Promoter Lock-inPromoter lock-in is the period after an IPO during which promoters cannot sell their shares, ensuring they retain skin in the game.
- DilutionDilution is the reduction in existing shareholders' percentage ownership when a company issues new shares.
- Promoter vs Professional ManagementThis contrasts companies controlled by founding promoters with those run by professional managers and dispersed ownership.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.