Sebi tweaks rules for minimum public float for listed companies

  • Currently, as per market regulations, all listed companies must maintain an MPS of 25%.

Priyanka Gawande
First Published3 Feb 2023
An additional method to achieve MPS compliance comprises transfer of shares held by the promoter or promoter group to an Exchange Traded Fund (ETF) managed by a Sebi-registered mutual fund.
An additional method to achieve MPS compliance comprises transfer of shares held by the promoter or promoter group to an Exchange Traded Fund (ETF) managed by a Sebi-registered mutual fund.

Mumbai: The Securities and Exchange Board of India (Sebi) on Friday tweaked the ways in which a listed company can achieve the minimum public shareholding (MPS) of 25%.

This comes after representations from listed companies and other stakeholders requesting relaxation in conditions for using non-prescribed methods to achieve MPS compliance.

Currently, as per market regulations, all listed companies must maintain an MPS of 25%. Newly listed firms are given three years to meet the requirement of 25% public float.

For issuers with a post-issue market cap of over 1 trillion Sebi had eased the deadline for 25% MPS to give five years. This was done to facilitate the IPO of Life Insurance Corp of India.

According to a Sebi circular on Friday, a different method allowed by Sebi to increase public shareholding in accordance with law is through exercise of options and allotment of shares under employee stock option scheme (ESOP), wherein a dilution of a maximum 2% will be allowed.

An additional method stated by the regulator comprises transfer of shares held by the promoter or promoter group to an Exchange Traded Fund (ETF) managed by a Sebi-registered mutual fund.

However, only 5% stake in listed companies will be allowed by Sebi to be transferred under this method.

Existing methods allowed by Sebi in order to achieve the minimum public float include a bonus issue, rights issue, Offer for Sale and Qualified Institutional Placement.

Sebi also allows the sale of shares held by promoters or promoter groups in the open market.

Based on this method, the promoter group can sell up to 2% of equity share capital of listed firms.

“This is subject to five times’ average monthly trading volume of the shares of the listed entity, every financial year till the due date for compliance of minimum public shareholding”, the market regulator said in a five-page circular.

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