Firms push to extend public holding deadline

Over 100 companies need to sell shares worth Rs 17,000 cr before June 3

As the deadline for companies to meet the minimum public shareholding rules nears, there is a growing clamour for relaxing the time limit by at least a few months. Companies, yet to comply with the norm to bring down promoter shareholding to 75 per cent, are pushing the finance ministry and capital markets regulator Sebi to extend the deadline. The reason given is that the market does not have the appetite to absorb share sales worth about Rs 17,000 crore within a month.

The Sebi deadline to meet the public shareholding requirement ends on June 3. More than 100 companies are yet to achieve the stipulated public shareholding of 25 per cent, notified by the finance ministry in 2010.

“Companies at an individual level are lobbying with the finance ministry to extend the deadline. Some of the reasons they are citing for the relaxation is that there is not enough liquidity in the market and it won't be able to absorb so much supply,” said a person privy to the development.

So far, Sebi has not softened its stand on the deadline, as it believes it has provided enough time and avenues for companies to meet the shareholding requirement.

Another person close to Sebi said the regulator was not keen on providing a blanket extension to all companies and might first consider whether serious attempts were being made by companies towards paring promoter stakes. “If Sebi has to extend the deadline by another three months, it might ask for a clear action plan from companies on how they plan to go about increasing the public holding. If they simply provide an extension, even the new deadline won't be taken seriously,” said a source.      Turn to TSI, Page 2 >

Investment bankers have said companies have been reluctant to sell at lower valuations, as they believe it could set a benchmark for future share sales.

Since last year, nearly 40 companies have pared promoter holdings through offer for sale or institutional placement programme (IPP)-- the fast-track routes launched by Sebi.

Shriram Subramanian, managing director at InGovern Research Services, is of the view that Sebi shouldn't extend the deadline as it has provided “sufficient time to companies and has also stressed a number of times that the deadline will not be extended”.

“Companies cannot hope for an extension just because their stock prices are low; the indices are at near highs. Good quality companies have already gone ahead and adhered to the Sebi norm,” he said. “There is always appetite for quality companies. It’s poor quality companies, with poor corporate governance, that will find it difficult to offload their shares.”