Over 40 companies of the NSE CNX-500, including Neyveli Lignite Corporation, L&T Finance Holdings and Jet Airways, may face “serious consequences” if they fail to comply with the minimum public shareholding norm, according to the Securities and Exchange Board of India.
To facilitate promoters to dilute their stake, the market regulator has knocked off the minimum 25 per cent upfront margin for institutions to participate in share auction. But, in such cases, the bids cannot be modified or cancelled, except any upward revision.
Earlier, it was mandatory for institutions to pay at least 25 per cent upfront margin to participate in offer-for-sale. However, the SEBI board, which met here on Friday, also decided to retain the 100 per cent upfront margin for institutions, wherein they are allowed to modify or cancel their orders. Investors will be able to view the indicative prices and the total bid quantity for offer for sale seamlessly throughout the day on the exchanges’ Web site. According to U.K. Sinha, Chairman, SEBI, the offer for sale mechanism has been found to be useful by market participants to achieve minimum public shareholding of 25 per cent in the case of listed private entities and 10 per cent in public sector. The deadline to meet this requirement has been fixed as June for private companies and August for public sector undertakings, and it is unlikely to be extended as the Government is keen to comply with the norm.
SEBI has received confirmation from the Government that it is keen to dilute its stake in PSUs to the required level, and “will not be seeking any extensions”, Sinha told mediapersons. .
Though there has been a good progress in this direction so far, Sinha said companies that violate the listing agreements or ICDR regulations will face serious consequences.
He also said that SEBI is serious about public shareholding and is willing to consider any practical suggestions pertaining to this.
According to Sinha, the SEBI board also discussed safety net mechanism for initial public offerings to protect retail investors from value erosion. “As there are arguments for and against such a mechanism”, SEBI is still discussing, and a decision will be taken soon, he said.