Sebi opens new window for promoters to dilute stake

Market regulator the Securities and Exchange Board of India (Sebi) today permitted promoters of top 100 companies to quickly dilute their shares through a separate window on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) which has to be completed within a day.

The guidelines, Sebi said in a circular, "will help promoters to dilute or offload their holding in listed companies in a transparent manner with wider participation."

The norms, which follows the decision taken by Sebi board earlier this month, will help the companies in complying with the minimum public shareholding stipulation.

The decision will also help the government to expeditiously offload its stake in public sector companies and raise funds for achieving the disinvestment target of Rs 40,000 crore for the current fiscal.

All listed companies are required to have at least 25% public holding while in case of state-owned company the limit is 10%.

Under this window, the promoter will have to sell equity of minimum 1% subject to a minimum of Rs 25 crore.

"However, in respect of companies, where 1% of the paid-up capital at closing price on the specified date is less than Rs 25 crore, dilution would be at least 10% of the paid-up capital or such lesser percentage so as to achieve minimum public shareholding in a single tranche," it said.

The duration of the offer for sale shall not exceed one trading day, it said, adding the placing of orders by trading members shall take place during trading hours.

As per the guideline, the promoters should not have purchased shares of the company during the 12 weeks period prior and after the offer of sale.

"All promoters or promoter group entities of top 100 companies based on average market capitalisation of the last completed quarter," it said.

Seller may declare a floor price in the notice, it said, adding in case the seller chooses not to publicly disclose the floor price, the seller shall give the floor price in a sealed envelope to stock exchange before the opening of the offer.

The guideline said that minimum of 25% of the shares offered shall be reserved for mutual funds and insurance companies, subject to allocation methodology. Any unsubscribed portion thereof shall be available to the other bidders.