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Finance Minister P Chida-mbaram on Friday assured market regulator Securities and Exchange Board of India (Sebi) that listed public sector units (PSUs) will follow the norms of minimum public shareholding, the deadline of which is August 2013. Meanwhile, Sebi Chairman U K Sinha said the market regulator has some information on the recent crash in mid-cap stocks, and will take fast action if there were attempts to manipulate the market.
Talking to reporters after Chidambaram met the Sebi board in a post-Budget customary meeting, Sinha said, “The finance minister assured us that PSUs will follow the rules on minimum shareholding.”
The meeting was attended by the full Sebi board and its executive directors and was addressed by the FM.
According to an amendment made on June 4, 2010, in the Securities Contracts (Regulations) Rules, 1957, listed companies will have to achieve and maintain a minimum public shareholding, of 25 per cent for those in the private sector and 10 per cent for those in the public sector. While the former must do so by June 2013, the latter have till August 2013.
Some listed companies and market intermediaries have asked for extension of the deadline and for flexibility in the manner of raising the public shareholding.
Adverse market conditions and a lack of market depth last year had been cited as problems in meeting the deadline. The total amount to be raised by companies to meet the requirement had been estimated earlier at Rs 32,000 crore – about Rs 11,000 crore by PSUs and the rest by private companies.
On its part, Sebi has allowed bonus shares and rights issues as additional avenues for meeting the deadline. It is also considering other modes on a case-to-case basis. Sinha said Chidambaram expressed satisfaction over these changes, which also include offer for sale (OFS).
On the recent crash in mid-caps, Sinha said, “We are probing. We have got some data. We got some information. But, we have not reached a stage where we can share some of the information. It is not conclusive yet.”
He assured that if there is any attempt by anybody to manipulate the market, Sebi will act very fast.
Recently, some of the mid-cap counters like Core Education have come under panic selling pressures. Some players linked it to pledged shares.
Sinha said there was a meeting in the finance ministry yesterday over know-your-customer (KYC) norms. “We will be able to do it in a manner that both domestic and foreign investors find it easier to invest in markets. The process is on and very soon we will be announcing it.”
The Chandrasekhar Committee looking at all avenues for foreign institutional investors is already there, Sinha said, adding the panel has held one meeting and will hold the second one on March 19.
Chidambaram in his Budget speech had said Sebi will simplify the procedures and prescribe uniform registration and other norms for entry of foreign portfolio investors. He added the regulator will converge the different KYC norms and adopt a risk-based approach to KYC to make it easier for foreign investors such as central banks, sovereign wealth funds, university funds and pension funds to invest in India.
The Sebi chairman said all steps proposed in the Budget on the Rajiv Gandhi Equity Savings Scheme (RGESS) will have to be taken by the government. The Budget had proposed to liberalise RGESS and allowed investors to invest in mutual funds as well as listed shares for three successive years, instead of one year now. The income limit has been raised from Rs 10 lakh to Rs 12 lakh to avail of tax benefits. “If you read it (the Budget), all the changes have to be made by the government. We are ready on our side. It is more of a tax issue,” Sinha said.
