The Finance Ministry has sought to soothe fears expressed in certain quarters that its directive for a minimum 25 per cent public float for listed companies could result in a flood of share offers in the market.
A senior Finance Ministry official also said that the move will not dry up resources for huge government borrowings this fiscal.
"We have done our homework. We have deliberately staggered the requirement for companies to dilute promoters stake, so that the market does not witness flooding of shares," he said.
As per the Finance Ministry's directive, listed companies have to dilute promoters holding by at least five per cent each year to bring it down to 75 per cent.
The official, however, did not reveal the figure that the Finance Ministry expects to mop-up from the market following the move.
However, it added that it would not be large to affect government's borrowing programmes.
The government is expected to borrow Rs 4.57 lakh crore from the markets this fiscal, but most of this would come in the first half, while public offers may come later.
When asked whether a slew of public offers would not dampen the market sentiment because of over-supply of issues, he said there would not be a flood of offers, but refused to say anything about sentiment "since it is for the markets to decide".
The new norms come at a time when most public offers, including by PSUs and MNCs like Standard Chartered Bank, received a poor response from retail investors, a trend attributed by top banker and HDFC Chairman Deepak Parekh to "over-pricing".
Meanwhile, analysts said the new public holding norm could spark a flurry of share sales by promoters that could increase market volatility in the short-term.
Experts remain cautious about the ability of the market to digest the huge supply of new issues in a volatile scenario, when most public offerings have generated lukewarm response from retail investors.
"It will be a very challenging situation for the market in the short-term as the supply will increase while demand continues to be low. With so many PSUs entering the market, price discovery may become distorted and suck out all the liquidity from the system," Purpleline Investment Advisors Director and Chief Executive P K Agarwal said.
According to an estimate, listed companies, including PSUs, will have to come out with public offers worth Rs 60,000 crore this fiscal.
This would include shares of state-run companies worth Rs 40,000 crore. This is in addition to the divestment target set by the government for stake sale in PSUs, including Coal India.
A recent study by Crisil Equities said there are 179 listed companies that have public shareholding below 25 per cent.
