Sebi allows two more avenues to hike public float at listed companies

The new methods include transfer of shares held by promoters to an ETF run by a Sebi-registered MF, exercising options and allotment of shares under ESOP programmes

The Securities and Exchange Board of India (Sebi) on Friday introduced two additional methods and streamlined existing ones to help listed companies achieve the 25 per cent minimum public shareholding (MPS) requirement.

The new methods introduced include transfer of shares held by promoters to an exchange traded fund (ETF) operated by a Sebi-registered mutual fund.  However, maximum 5 per cent stake in the listed entity will be allowed to transfer under this route subject to certain disclosure requirements.

Another method introduced by Sebi to allow increase in public holding by exercising options and allotment of shares under an employee stock option (ESOP) programme. Under this, maximum dilution allowed will be 2 per cent. This method can benefit new-age companies.

Some of the existing avenues allowed are share sale through the offer for sale (OFS) route, follow-on public offering (FPO), qualified institutions placement (QIPs), rights issue and bonus issue. Under the last two methods, promoters have to forgo their entitlement.

Sebi also allows sale of shares held by promoters in the open market.

Under this, promoters can sell up to 2 per cent stake subject to it being less than five times the average monthly trading volume. Further, they can sell only up to 5 per cent during a financial year in one or more tranches.

All listed companies have to maintain a 25 per cent public float. The rule is aimed at having a diversified shareholding to facilitate fair price discovery. As a result, the promoter holding has to be pared in a way that will onboard public shareholders. Large newly-listed companies get up to five years to meet the MPS norms.