Roadmap for public holding in listed companies by Dec

The finance ministry is likely to come out with a framework by December for increasing public holding in listed companies where the promoters’ stakes are more than 75 per cent.

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.

“We have to amend Securities Contracts (Regulation) Rules (SCRR). We have started the process. Consultation with Sebi is going on,” official sources said.

The process is expected to be complete by December. By then, the government would be notifying the amendment in SCRR, the sources said.

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

In the same league are some of the private companies like Wipro, DLF, Reliance Power, Mundra Port, TCS and IL&FS.

In this fiscal’s 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 rules provide for the requirements which have to be complied with by public companies for the purpose of getting their securities listed on any stock exchange.

One requirement seeks to ensure the availability of a minimum portion/number of shares (floating stock) of the listed securities with the public so that there is a reasonable depth in the market and the prices of the securities are not susceptible to manipulation.

The SCRR seeks to achieve this by prescribing a minimum part of the issue to be offered to public by the company seeking listing on a recognised stock exchange.

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

Currently, the norms prescribe that at the time of listing at least 25 per cent of shares be given to public for subscription. The other option is that at least 10 per cent of shares are given to the public, provided that minimum 2 million securities are offered, the size of the offer is a minimum of Rs 100 core and the issue is made only through book building method with allocation of 60 per cent of the size to the qualified institutional buyers.