Business Standard

Bankers, firms press for change in new public float rules

Related News

Against minimum 5 per cent annual stake sale, want more flexibility.

are pressing for removal of a rule mandating a minimum five per cent annual by promoters of companies with of under 25 per cent, the minimum prescribed under the Securities Contracts (Regulation) (Amendment) Rules.

Companies and some investment bankers are also demanding the inclusion of while calculating the public float.

Industry and bankers are worried that a forced dilution will adversely impact valuations of companies and return on equity. Besides, they said, the market might not have the appetite to absorb large share sales. The government has already indicated that it is open to reviewing some of the norms prescribed in the SCRA rules. The move is expected to result in total equity dilution of about Rs 1,60,000 crore by 179 listed companies.

A senior executive of a large investment bank said the government should simply ask companies to meet the 25 per cent public float norm by a stipulated deadline, without mandating at least five per cent stake sale annually. “That should be left to companies, so that they do it in line with the market conditions and based on their need for funds. All that the government should say is that all listed companies should have 25 per cent shareholding in three years or in five years,” the executive added.

The investment banking head of a foreign bank said the industry was of the opinion that depository receipts were public holding and the government had used this very argument while diluting stake in some public sector companies.

The bankers also say there is lack of clarity on a host of issues. “It is not clear what the penalty for non-compliance is. Similarly, it is not clear who we need to approach for an exemption. Should we go to the government or to (the Securities and Exchange Board of India)?” asked a banker.

The earlier rules had also set the minimum float at 25 per cent, but stock exchanges and Sebi had the power to waive or relax this for public sector undertakings and companies in information technology, media, entertainment and telecommunications sectors.

Read more on:   

Read More

Going out of Citi Suvidha? Keep higher balance

Citi India’s ‘Suvidha’ salary account holders will need to maintain a monthly net relationship value of Rs 1 lakh if their salary is no longer ...

Quick Links

More news from Finance Rss icon

Life insurers seek separate tax deduction limit of Rs 1.5 lakh

It will encourage long-term savings and help incremental flows come into life insurance sector, says LIC

Organ donation now part of larger health policies

With organ transplants gaining popularity, insurers are now offering to cover expenses

Insurance for e-rickshaws to be offered as per RTO norms

E-rickshaws are likely to come under the auto-rickshaw category, where there was a 10% hike in TP premiums for this fiscal

Back to Top