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| Exempt PSUs from 25% public holding norm: Scope |
| Press Trust of India / New Delhi Jul 30, 2010, 17:40 IST |
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An apex public sector undertakings (PSU) body today opposed the new norm that makes it mandatory for listed companies to have 25 per cent public float, saying that it would not be possible for state-owned companies to offload equity in large quantities.
"PSUs should be kept away from this regulatory norm of 25 per cent mandatory public holding," Standing Conference of Public Enterprises (Scope) Director General U D Choubey told PTI. Scope is an apex body of central public sector firms.
The new norm, formulated by market regulator Sebi, would also hurt the government's disinvestment programme as there would be a flood of fresh equity by companies to meet the requirement, Choubey said.
"The new listing norm maintaining 25 per cent public holding may affect the government policy of encouraging listing of more and more public enterprises on the bourses," Choubey said.
He said that complying with the rule of the Securities Contract Regulation, over two dozen PSEs and public sector banks would have to bring follow on public offers in the market.
As per estimates of Scope, the value of 5 per cent of the market capital of public sector enterprises and banks would be over Rs 46,000 crore.
Besides, several private players will have to bring FPOs in the market which would create huge over supply of stocks and affect prices.
He pointed out that under this scenario where market is already flooded, the new PSE aspiring to get listed on bourse may not feel encouraged as their stock value would be affected under this situation.
The PSEs would not find the environment conducive for their initial public offers which would be a set back to the government's policy of listing more and more PSEs on bourses, he said.
"The general apprehensions of the market regulator Sebi is that corporate manipulate with the market. But this view does not hold good for PSE because here we have many checks and balances like statutory audits."
According to the norm, for new listing, if the post issue capital of the company calculated at offer price is more than Rs 4,000 crore, the company may be allowed to go with 10 per cent public share holding and later divest 5 per cent per annum to meet the threshold.
Of the 56 listed PSUs and state-owned banks, the public holding in about 25 entities is less than 25 per cent. The major PSUs which need to raise public holding to meet the threshold include IndianOil, MMTC, NTPC and SAIL.
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