Around 75 private and 12 PSU companies are yet to comply with the revised minimum public shareholding norms. Over the next few days, promoters of these 75 would have to sell shares worth about $1.9 billion
Even as the deadline to increase public shareholding to 25% (for private companies it is 3 June 2013) and 10% (for public sector units-PSUs it is 9 August 2013) nearing, there are still 87 listed companies that have yet to comply with the revised guidelines issued by the finance ministry on 4 June 2010.
As reported earlier by Moneylife
, most companies are yet to increase their free float to the requisite level, and compliance may entail significant stake sales by promoters, which could depress share prices in the near term.
However, the fact is that share prices are falling even as the deadline nears. This only means neither the companies nor the stock market players give a damn about the Securities and Exchange Board of India (SEBI) diktat, which has been around for over seven years now. SEBI has had three chairpersons during this period.
So far, the market has seen 44 offer for sale (OFSs) and eight institutional placement program (IPPs) worth $9 billion. Other private companies are hurrying to comply with the minimum public shareholding (MPS) norms before the June 2013 deadline (for public companies the deadline is August 2013). SEBI has allowed companies to take either one of the routes—follow-on public offer (FPOs), OFS, IPP or bonus, rights issues—to comply with the revised norms. A company wanting to take any other route must take SEBI's permission before doing so.
“We estimate a further sale of around $1.9 billion over the next few days (by 3rd June 2013) as 75 private sector companies have yet to comply with the 25% MPS norm. Another 12 PSUs have to comply with the MPS requirement of 10% by 9th August and we estimate the sale amount at $680 million at current prices,” said Kotak Institutional Equities Research in a report.
According to media reports, SEBI is working on penalties for companies that may be unable to meet the revised MPS norms, but would be lenient with companies that made an effort to meet them. The regulator also stated it would try to ensure that any action taken would not harm the interests of minority shareholders.
On 4 June 2010, the finance ministry amended the Securities Contracts (Regulation) Rules, 1957 (SCRR), raising the MPS requirement to 25% for listed companies or those that proposed to list. Listed companies that did not meet the MPS norm would be required to increase public shareholding by at least 5% a year until they met the norm. On 9 August 2010, the SCRR was amended again to revise public-sector companies' MPS norms to 10% (from 25%) within three years from August 2010.