Mumbai: Companies listed on stock exchanges can soon start planning how to take their public shareholding to at least 25%.
The finance ministry is preparing a final draft on the issue to be presented shortly to finance minister Pranab Mukherjee.
After Mukherjee, in his budget speech on 6 July, stated his intent to see wider public holding in both public sector and private companies, the finance ministry and market regulator Securities and Exchange Board of India, or Sebi, have swung into action.
Also See Shareholding Pattern (Graphics)
The issue of higher public shareholding has been languishing for at least a decade.
Last year, the finance ministry put out a discussion paper on 25% public holding in listed companies.
“We have received several responses to the discussion paper and a final draft will be put up to the finance minister shortly,” said a person close to the development, who declined to be named.
According to other people familiar with the initiative, Sebi is also in favour of a minimum 25% public shareholding and keen that this be applicable to both public and private companies. These people, too, requested anonymity.
The issue now under discussion is on prescribing a time frame and the manner in which firms should move to the threshold.
One issue under consideration is on fixing an annual percentage up to which a company must dilute its promoter holding till it reaches the 25% threshold.
This is to ensure against any big-ticket dilutions that could hamper a company’s stock price.
Some experts are arguing for a market capitalisation-linked dilution as there may not be much public appetite for the shares of some firms.
Current norms allow companies to make a public issue of 10% of their equity if the issue size is in excess of Rs100 crore or two million shares. State-owned firms are exempt from this clause.
“We may put up the final draft for 45 days in the public domain and then amend the rules,” the person mentioned first said.
The issue may come up for discussion between the finance minister and Sebi board members on Friday in Delhi.
Graphics by Sandeep Bhatnagar / Mint