SEBI cracks whip on 105 companies for not complying with public shareholding norms
Moneylife Digital Team 05 June 2013

Voting rights and corporate benefits of promoters and directors of Adani Ports, BGR Energy Systems, Tata Teleservices and Videocon among others, have been frozen. SEBI has also warned of levying monetary penalties, initiation of criminal proceedings, restricting trading activities of related stocks, etc

Market regulator Securities and Exchange Board of India (SEBI) has cracked the whip on 105 companies including Adani Ports, BGR Energy Systems, Tata Teleservices and Videocon for not complying with the mandatory 25% public holding (minimum public shareholding-MPS) norms. Out of the 105 non-compliant companies, 33 are suspended by the stock exchanges.

 

SEBI's whole time member, in an order issued late last night had frozen voting rights and corporate benefits of promoter, promoter group and directors of these companies, until they comply with the minimum shareholding norm.

 

The market regulator has also prohibited promoter, promoter group and directors of these non-compliant companies from buying, selling and dealing in the company shares in any manner. In addition, SEBI has restrained them from holding any new position as a director in any listed company, till they follow the norms.

 

In a 13-page order issued late last night, SEBI also warned of further actions, including levy of monetary penalties, initiation of criminal proceedings, restricting the trading activities of related stocks and other possible directions.

 

The companies whose promoters and directors would face prohibitory orders include Adani Ports, BGR Energy Systems, Videocon Industries and Tata Teleservices.

 

The guidelines issued on 4 June 2010 by the finance ministry make it mandatory for Indian companies to have a free float of at least 25% before 3 June 2013. State-run companies or public sector units (PSU) too have to comply with these guidelines by 8 August 2013. Market regulator SEBI had clearly said that the deadlines would not be extended.

 

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.

 

According to BNP Paribas Securities (Asia), these guidelines have created an asymmetrical situation between sellers of equity i.e. company promoters and potential buyers or secondary market investors. “The promoters have to sell by a certain date, but the buyers are not forced to buy. In fact, secondary market investors may not even be interested in buying the equities of many of the companies. This, in our view, creates downside risk to the share prices of companies that need to increase free float,” the brokerage said in a research note.

 

As of May 2013, the market had seen 44 offers for sale (OFSs) and eight institutional placement programmes (IPPs) worth $9 billion. SEBI has allowed companies to take either one of the routes—follow-on public offers (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. 

 

Here is the list of companies against which SEBI had issued the order...

 
Comments
Sunil Arora
8 years ago
Why is Westlife not figuring in this list. Today I read that they are going to allot equity to Airsig partners. Are they allowed to?
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