Promoter-heavy companies allowed placement route

Promoters holding above 75% can also use exchange window to pare stake.

In a move that will help the government's divestment programme, the Securities & Exchange Board of India (Sebi) on Tuesdasy introduced two new methods— institutional placement programme (IPP) and offer for sale of shares through the stock exchange — to help companies comply with the minimum public shareholding norms.

Under the Securities Contracts Regulation Rules (SCRR), all listed companies should have a minimum of 25 per cent of public shareholding.

Using the IPP route, companies can increase public shareholding by as much as 10 per cent either by way of fresh issue of capital or dilution by the promoters through an offer for sale. Under IPP, shares can only be issued to qualified institutional buyers, while 25 per cent of the offer should be reserved for mutual funds and insurance companies. According to the rules, every IPP issuance should have at least 10 allottees and no single investor shall receive allotment for more than 25 per cent of the offer size. Further, companies planning to raise money under IPP will have to file a red herring prospectus with Sebi along with the Registrar of Companies and stock exchanges.

Under the sale of shares through stock exchanges, companies through a separate window offered by the stock exchange will be able to offer at least one per cent of the paid-up capital, subject to a minimum of Rs 25 crore. This facility can be availed by only those promoters who are active and eligible for trading. The promoter or the promoter group of the company will not be permitted to bid for the shares.

These new routes will help the government pare its stake in PSUs. Promoters of private companies like Wipro, DLF and Mundra Port & SEZ will also be able to reduce their stake to 75 per cent through these routes.