The Securities and Exchange Board of India (SEBI) is open to allowing more alternative routes to help listed companies comply with the minimum public shareholding norms.
This was stated by SEBI Chairman U.K. Sinha at a conference on minimum public shareholding organised by the PHD Chamber of Commerce and Industry here on Saturday.
Sticks to deadline
Sinha indicated that listed companies would not be given any leeway beyond the July 2013 deadline to conform to the minimum public shareholding norm.
In August 2010, the Securities Contracts (Regulation) Rules (SCRR) was amended to provide that government companies will have to achieve minimum public shareholding of 10 per cent (instead of the 25 per cent norm applicable to private companies) within a period of three years.
Private sector companies were given a transitional period of three years to bring their public shareholding up to the requisite level of 25 per cent.
Sinha said that it was completely wrong on part of Corporate India to contend that the three-year time frame given was too short for compliance.
The issue of minimum public float was first talked about in 2001 itself.
“In fact, the timeframe has already crossed 11 years, definitely six years (referring to 2006 when two-year time frame was again given for achieving 10 per cent or 25 per cent),” he said. Sinha also said that it would not be right to take shelter under the argument that market conditions are not good enough for promoters’ to dilute their stakes. He reeled out numbers to show how the stock indices had recorded robust increases in 2007, 2008, 2009 and 2010.
As on end March this year, 193 listed companies were non-compliant with minimum public shareholding norms, he said. Of the 193 companies, as many as 95 listed companies had public float of less than 10 per cent and 35 companies had public shareholding of 10-20 per cent.
Sinha said that listed companies would have to sell shares worth Rs 32,000 crore (based on July valuation) to comply with the minimum public shareholding norms. Of this Rs 32,000 crore, the public sector companies shares will be around Rs 11,000 crore and the rest from the private sector listed companies.
penalties
He, however, parried questions on whether SEBI would look at imposing penalties on corporates which may remain non-compliant even beyond July 2013.
“I would like to clarify that violation of listing agreements or violation of SCRR, the consequences of that is already provided in various sections,” Sinha said.
Four methods
Currently, SEBI has allowed four methods for increasing the public shareholding.
These are issue of shares to public through prospectus (FPO); Offer for sale of shares held by promoters to public through prospectus; sale of shares held by promoters through the offer for sale route (OFS) and institutional placement programme (IPP). Both OFS and IPP were allowed in January.
SEBI is now getting a number of suggestions to allow more methods for enabling listed companies to comply with minimum public shareholding.
Some have even suggested that SEBI should allow promoters to offload shares through the secondary market and this should be counted for minimum public shareholding.
Currently, for minimum public shareholding norm purposes, promoters are not allowed to sell shares through secondary market. This is not an approved method.