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Market regulator Sebi today said all listed companies, including public sector units, will have to meet the norm of minimum 25% public holding by August next year.
“We have taken it up with the government that the same (as for private sector companies) discipline should also apply to PSUs… people (PSUs) should try and honour whatever time frame has been given,” Sebi chairman UK Sinha said on the sidelines of a workshop today.
On whether listed companies will be able to meet the requirement given the prevailing market conditions, he said, “To talk about whether it is practical or that only when the market reaches a particular level, only then it will be sold… I think these are arguments which do not convince us.”
Sinha said listed companies were given three years to meet the requirement of minimum public holding.
While the private companies have to meet the norms by June 2013, for PSUs the deadline is August 2013.
Under a notification of the Securities Contracts Regulations (Amendment) Rules issued in 2010, the government made it mandatory for all listed entities to have a minimum public float of 25 per cent and stipulated the time limit.
As many as 181 companies from the private sector will need to sell shares worth about Rs 27,000 crore to meet the minimum public holding norms for listed firms, Sinha had said earlier.
Besides, 16 public sector units (which do not have 25 per cent public holding) will have to mobilise Rs 12,000 crore to adhere to the new flotation norms.
In January this year, Sebi had introduced Institutional Placement Programme and Offer for Sale of Shares Through the Stock Exchange with an aim to fast track the sale of promoters’ equity in listed companies to meet the minimum public shareholding norm.
The Offer for Sale of Shares, popularly known as the auction route, has since been used by three companies, including ONGC.
New investors
To minimise the risks associated with direct stock investment by new investors, market regulator Sebi has asked the government to route the tax-saving Rajiv Gandhi Equity Savings Scheme through mutual funds.
The Sebi chairman said the regulator had submitted a proposal in this regard to the finance ministry.
“The thinking in Sebi is that first-time investors may not have adequate information about the stock market… they should enter the market through an institutional investor,” he said.
“…is it right to expose an uninformed investor directly into the equity market or provide him access through mutual funds,” he asked while responding to queries on the new scheme announced by finance minister Pranab Mukherjee in his budget speech.
The minister had announced a 50% tax deduction to retail investors with an annual income of less than Rs 10 lakh for investment up to Rs 50,000 in a year with a lock-in period of three years under the scheme.
Retail investors can avail themselves of the scheme only once in a lifetime. This is the first-ever tax benefit scheme announced by the government to encourage the participation of retail investors in the equity market. By offering this scheme, the government aims at channelising household savings into the stock markets.
Sinha also expressed concern that penetration of the mutual fund industry in the retail sector was not improving.
However, he said, “We are happy in one way that compared to 2010-11, in (2011-12) net inflow in equity schemes of MF is much higher”.
On equity-linked savings schemes, Sinha said there would be clarity once the direct taxes code bill was finalised.