Mumbai: Finance Minister Pranab Mukherjee, in his Union Budget, reiterated the government’s commitment to raise the minimum threshold of public holdings in all listed firms. The average float in listed companies is less than 15% now and the plan is to raise it to 25%, to help make the Indian capital market more deep and liquid.
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The Securities and Exchange Board of India or Sebi, country’s capital market regulator, feels it should not be done in a hurry and corporations should be given time to dilute promoters’ stake. Sebi chairman C.B. Bhave said the new rule should be applicable to all listed entities, and the public sector undertakings or PSUs should not be given any relaxation in this regard.
Incidentally, PSUs enjoy a special status when it comes to the appointment of independent directors. Under a clause of listing norms, all listed companies should have 50% independent directors on the boards but the PSUs have not been following the norms.
In an exclusive interview with Mint , Bhave spoke on a number of critical aspects of Indian market, ranging from the issues that come on the way of extending trading time to the status report on peer review that Sebi decided to undertake in the wake of India’s largest corporate fraud (Satyam Computers Services Ltd) to pricing of qualified institutional placements (QIPs), disclosure of pledge of shares by promoters, anchor investors in stock exchanges and why the regualtor has not yet allowed MCX Stock Exchange Ltd (MCX-SX), India’s newest stock exchange, to kick off equity trading.
Edited excerpts:
Are you working on a road map for at least 25% public listing of firms, as outlined by finance minister in his Budget speech?
Actually it is a proposal that the government had made for amending the rules under the Securities Contract Regulation Act. It had put out a discussion paper and asked for public comments on that. The process is being concluded through consultations. Now the government will take action to amend those rules.
Sebi was consulted on this. We have suggested that we need a phased approach. We ourselves have allowed companies to come out with 10% offers and so on. So when we ask them to make it 25%, we need to give them time.
We also need to ensure that the listed public sector undertakings (PSUs) and private companies are treated on par. There are many listed PSUs with less than 10% public holding. We should have one rule for all.
We have pointed out that Clause 49 (of the listing agreement) does not make two classes but the government is simply not appointing adequate number of independent directors for some of the companies.
It is not possible to administer a rule if one set of companies cannot follow it for reasons beyond their control.