COMPANIES
TO MAINTAIN 25% PUBLIC STAKE AT ALL TIMES
From now on companies
will have to maintain the stipulated minimum public holding
(non-promoter) level at 25% on a continuous basis. A failure
could trigger the delisting clause. This follows the finance
ministry and Sebi finally deciding to remove the confusion
prevailing over the minimum public holding in listed companies.
This has been a grey area so far, with companies sticking
to the 25% stipulation while listing, but whittling it down
subsequently. The move would increase the availability of
papers in the stock market. Feedback received by the regulatory
authorities shows that there is a genuine shortage of shares
of good companies for the public to invest in.
According to Hemant
Sahai of Hemant Sahai Associates, the Sebi guidelines on listing
apply to companies only at the time of listing. Subsequently,
there is no distinction between promoters and non-promoters,
and the former are at liberty to ramp up their shareholding.
Nirma, Dabur, Jet
Airways and IndianOil are among the companies where the non-promoter
holdings were below the stipulated 25% as of March 31, '05.
It, however, could not be known whether any of these companies
have exemptions from the minimum public-holding stipulations.
Interestingly,
so far the delisting norms would get triggered only when the
non-promoter holding falls below the minimum 10% level of
total equity. One of the options being debated is to scale
up the norms governing the delisting rules to kick in at sub-25%
public float level. This would remove the leeway for the public
listed companies.
The only exception
to the continuous listing norm of 25% is provided for TMT
(telecom, media and technology) companies. The government
had issued a notification in 2001, which allowed these companies
to enter the stock markets with a public holding level of
only 10% of their total equity. The logic was to encourage
these sunrise companies to access the markets to raise additional
resources without having to dilute their promoter's holding
substantially.
In addition, some companies in the public sector, too, are
exempted from the 25% requirement. But there are hardly any
other companies in the private sector which enjoy an exemption
from the public float requirement.
There are, however,
no figures available on the additional scrips that would enter
the markets with the new continuous listing norms. Experts
said it will be difficult to peer into the specific listing
agreements of each private sector company with the concerned
stock exchanges, to find out if there are any exemptions provided.
