Listed PSUs may not be exempt from 25% public holding rule

The government is considering a proposal to increase public holding in listed state-owned companies to 25 per cent, a move that would result in a host of follow on public offers.

The finance ministry has started the process of drafting rules to increase public holding in the listed companies in which the promoter holds more than 75 per cent stake.

"It would be explicit...There would be no exception. This would include public sector companies as well," a senior ministry official said.

The draft will be released soon for public comments. "The process (to draft rules) has started...The framework would be ready by this year-end," the official added.

The government has to amend the Securities Contracts (Regulation) Rules (SCRR) for the purpose, he said.

The rules provide for the requirements which have to be met with by public companies for the purpose of getting their securities listed on any stock exchange.

And once the framework is out, a slew of follow on public offers (FPOs) is expected to hit the market as about 180 companies have less than 25 per cent public holding.

Among the leading PSUs where promoter, the government, holding is well above 75 per cent are MMTC, NMDC, Hindustan Copper, Power Grid, NTPC, SAIL, Shipping Corporation, Neyveli Lignite.

The government on Monday cleared disinvestment in two state-run power utilities — NTPC and Satluj Jal Vidyut Nigam (SJVNL). The Cabinet Committee on Economic Affairs approved five per cent stake sale in NTPC and 10 per cent in SJVNL.  

After 5 per cent stake dilution, the government's holding in NTPC would come down to 84.5 per cent from the current 89.5 per cent.

In his Budget speech, Finance Minister Pranab Mukherjee had said the average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings.

"This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies," Mukherjee had said.

The listing agreement entered into by a company with a stock exchange requires the former to ensure minimum non-promoter holding on a continuous basis.