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Sebi wants 25% public holding in PSUs

LiveMint logoLiveMint 28-05-2014 PTI

New Delhi: After ensuring minimum 25% public shareholding in private sector listed companies, market regulator Securities and Exchange Board of India (Sebi) is contemplating similar norms for public sector undertakings (PSUs), but a final decision would be taken as per views of the new government at the centre. There are close to 30 listed PSUs where public investors hold less than 25% stake, while the existing norms require a minimum public holding of only 10% for them. Sebi, which regulates all listed companies, has suggested to the finance ministry an increase in minimum public shareholding in listed Public Sector Undertakings (PSUs) as part of its efforts to deepen the markets and increase public float, people familiar with the matter said.

However, a final decision in this regard can be taken only after getting the views of new finance minister Arun Jaitley, who took charge of his office yesterday. The major PSUs where government holding currently stands at more than 75% include Coal India Ltd, Steel Authority of India Ltd (SAIL), MMTC Ltd, NHPC Ltd, NMDC Ltd and SJVN Ltd. The market watchdog is of the view that the PSUs can be given a three-year time period for meeting the new limits, people familiar with the matter said, while adding that the move would also help in promoting wider participation from investors and boost government’s plan of raising funds through disinvestment.

A similar time frame was given to private sector companies in 2010 to achieve minimum 25% public holding, while PSUs were also given three years in the same year to increase their public shareholding to at least 10%. The deadline for 25% minimum public shareholding requirement for private companies ended in June 2013, while the same for the government to reduce its stake to at least 90% in PSUs was August 2013. When the norms were proposed in 2010, more than 200 companies needed to comply. Incidentally, Sebi had first proposed in June 2010 that all listed companies—including PSUs—would need to have a minimum public shareholding of 25%. However, in August 2010, the norms were amended to revise public sector companies’ minimum public shareholding norms to 10% (from 25%) within three years. Sebi had taken action against 105 private companies, their promoters and directors for failing to achieve the 25% public float within the stipulated period. These directions issued by Sebi against these firms included freezing of voting rights and corporate benefits such as dividend, rights, bonus shares and split of the promoters or promoter group of the non-compliant companies with respect to the excess of proportionate shareholding in respective companies. Almost all PSUs had managed to meet the guideline before the end of the August deadline. However, the regulator had allowed the government to transfer its holding in excess of 90% in sick PSUs to the Special National Investment Fund.

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