The Finance Ministry today said that its new rule requiring listed companies to have a minimum 25 per cent public holding will boost capital markets and help the government's divestment programme.
"It was announced in the Budget. This has been operationalised and in the medium-term and long-term it would be for the better health of the capital market," Finance Secretary Ashok Chawla told reporters here.
The Bombay Stock Exchange benchmark, Sensex, closed over 300 points down on the first day of trading after the announcement of the new rule, but analysts attribute the negative sentiments to renewed concerns over the debt crisis in Europe.
Chawla said that the 25 per cent criteria will provide greater opportunity to investors to take part in equity offering of companies.
When asked whether markets will be able to absorb the rush of public offers, necessitated by the new norms, he said, "Well, it is not something, which is going to happen in a day. There is a rollout plan as you would have seen."
He said that 25 per cent norms will play out over a long period of time. "So there is really no anxiety, if something is really going to happen to the full extent tomorrow."
According to the new norms, listed companies will have to dilute promoters stake by at least 5 per cent each year to reduce it to 75 per cent.
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The Finance Secretary also said the new norms will have a positive impact on disinvestment.
The government plans to mop-up Rs 40,000 crore from disinvestment his fiscal. So far disinvestment in SJVNL has fetched the government over Rs 1,000 crore.
To a query, a senior Finance Ministry official said that the government's borrowing plan of Rs 4.57 lakh crore will not be disturbed as of now, because of the new norms.
"FY11 borrowing programme stands," he said.
Listed companies, including PSUs, will be forced to sell shares currently valued at Rs 60,000 crore by March 2011 to continue to remain listed, following the government's new norms on public holding.
Of the Rs 60,000 crore, about 40,000 crore would come from the listing of state-run companies. In addition the government has set a target of Rs 40,000 crore from stake sale in PSU's, including Coal India.