No exceptions; schedule for already listed firms affected; Rs 1.6 lakh crore equity dilution seen.
The government today made it mandatory for all listed companies to have a minimum public float of 25 per cent. Those below this level will have to get there by an annual addition of at least 5 per cent to public holding.
The move, reported by Business Standard on Wednesday, was expected to result in equity dilution of about Rs 1,60,000 crore by 179 listed companies. These include Reliance Power, Wipro, Indian Oil Corporation, DLF and Tata Communications.
| IN A PICKLE | |
| Nifty 50 Companies | free- float % |
| Power Grid | 13.64 |
| SAIL | 14.18 |
| Reliance Power | 15.22 |
| NTPC | 15.50 |
| Wipro | 20.48 |
| DLF | 21.36 |
| As per shareholding pattern for March ‘10 Compiled by BS Research Bureau | |
“The minimum threshold level of public holding will be 25 per cent for all listed companies,” the finance ministry said in a statement, after notifying the Securities Contracts (Regulation) (Amendment) Rules, which describe requirements to be met by companies for getting their shares listed on stock exchanges.
According to the notification, ‘public’ will not include the promoter, promoter group, subsidiaries and associates of a company. ‘Public shareholding’ will mean equity shares of the company held by the public and not the shares held by the custodian against depository receipts issued overseas.
No exception now
Finance minister Pranab Mukherjee in his Budget speech for 2009-10 had proposed to raise the threshold for non-promoter, public shareholding. The rules till now had also set the minimum float at 25 per cent, but stock exchanges and the Securities and Exchange Board of India (Sebi) had the power to waive or relax this for public sector undertakings and companies in the information technology, media, entertainment and telecommunications sectors. This leeway has been ended.
“A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities, to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation,” the ministry said in the statement today. The requirement for continuous listing will be the same as the conditions for initial listing.
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New listing
For new listing, if the post-issue capital of the company calculated at offer price is more than Rs 4,000 crore, it may be allowed to go public with 10 per cent public shareholding and comply with the 25 per cent public shareholding requirement by increasing the public float by 5 per cent annually.
This rule, however, does not apply to companies whose draft offer document was already pending with Sebi. Such companies, irrespective of the amount of post-issue capital, are required to comply with the 25 per cent norm by increasing the public shareholding by at least 5 per cent every year.
A company can increase its public shareholding by less than 5 per cent in a year if such increase brings its public shareholding to the level of 25 per cent in that year. If the public shareholding in a listed company falls below 25 per cent at any time, the company will have to bring the public shareholding to 25 per cent within 12 months from the date of such fall, compared with the two years allowed at present.
Also read: June 3: FinMin to make shareholding rules less cosy