The government move to make it mandatory for listed companies to raise public shareholding to 25 per cent could witness a spate of issues, garnering over Rs 2 lakh crore from the primary market over the next few years.
The government today made it mandatory for listed companies to raise public shareholding to 25 per cent, with at least 5 per cent dilution a year, a move that would attract more investors and check share price manipulation.
A recent study by Crisil Equities said there are 179 listed companies that have public shareholding below 25 per cent and the move would significantly increase liquidity in the equity markets, make fair price discovery more robust and enhance investor participation.
"Based on the current market price and the extent of promoters' holding, it is estimated that these companies will raise Rs 1,60,000 crore if they opt for sale of shares and Rs 2,10,000 lakh crore if they plan to dilute their stake via issue of fresh shares," Crisil Equities said.
It estimated that about 82 per cent of the estimated funds are likely to be raised by 29 listed government entities if they adhere to the new norms.
At present, most of the IPOs come with a 10 per cent float and certain listed PSUs have public holding even below that threshold.
Crisil said the government move would be in line with practices followed in the developed economies and is expected to improve the liquidity in these companies.
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While the London Stock Exchange requires 25 per cent minimum public shareholding, the Singapore and Hong Kong bourses also stipulate public shareholding between 12 per cent and 25 per cent, based on market capitalisation.
Crisil estimates that over the past six years, companies raised Rs 50,000-55,000 crore annually on an average through equity issues, including IPOs.