Indicating it is not going to relax the mandatory requirement on enhancing public shareholding to at least 25 per cent in all companies, the Securities and Exchange Board of India (Sebi) has written to Union Cabinet Secretary Ajit Kumar Seth to ensure implementation by the deadline.
The deadline given by the market regulator for government-owned companies is August 2013. It is June 2013 for private ones. Currently, 181 companies from the private sector and 16 public sector undertakings have promoter holdings of more than 75 per cent.
Among the top public sector companies in terms of promoter holdings, government holding in Coal India is 90 per cent, in NTPC is 84.5 per cent, in MMTC is 99.3 per cent, NMDC 90 per cent and Indian Oil 78.9 per cent.
Noting some companies felt there would be a relaxation in the June 2013 deadline for them, Sebi chairman U K Sinha had warned promoters of the 181 private companies last week that it would not be extended.
The 181 private and 16 state-run companies would have to sell shares worth a cumulative Rs 40,000 crore by the deadline to meet the norms. According to Sebi data as on February-end, the 181 private ones would have to sell shares worth Rs 27,000 crore and the 16 PSUs would need to sell securities worth Rs 12,000 crore to meet the requirement. About Rs 12,500 crore worth of shares will have to be sold by six private companies alone, while another eight companies will have to sell between Rs 500 and Rs 1,000 crore each, totalling about Rs 5,300 crore.
In June 2010, the government had amended the Securities Contract (Regulations) Act rules, by ordering all listed companies to have a minimum of 25 per cent public shareholding. Sebi then set the deadline for compliance. Only a handful of these companies have conducted share-sales to enhance public holding.
The Sebi view is the promoters had been given three years’ time to take this step but in two years, they have not done anything. To now expect the deadline to be extended is unacceptable.
Market experts say most promoters were holding back stake sales on expectations of better valuations later.
In January, the regulator introduced two modes recently for this purpose — offer for sale on the stock exchange platform and an Institutional Placement Programme for bulk sale, aimed at reducing the time and cost in achieving this. Earlier, the companies had three routes available — issue fresh shares through a prospectus, an offer for sale through prospectus and selling in the secondary market.
Sebi officials say the new modes offer a quick and cost-effective way of doing it now. So far, ONGC and Wipro have sold shares through the offer for sale or auction route.