Skip to main content

Sebi plans further rise in public float

Sebi plans further rise in public float
The Securities and Exchange Board of India is mulling another increase in minimum public shareholding (MPS) requirements from the current 25 per cent to 30 per cent, or even 35 per cent, said three people in the know.The discussions at the market regulator´s end are, however,anascent stage, clarified one of India has traditionally been driven market and increasing the threshold will ensure wider through institutional investors, more market depth and better corporate governance standards.
“A wider ownership will improve liquidity and reduce the scope for price manipulation, besides bettering corporate governance standards,” said Pranav Haldea, managing director, PRIME Database.“Thus far, most private sector firms have complied with the Sebi requirement for a 25 per cent public float and raising it to 30 per cent or even 35 per cent should not pose a major challenge to most.” An email to Sebi did not receive a response.
At present, 110 of the BSE 500 companies currently have less thana30 per cent float.Twenty five companies, including 13 public sector entities, have a public holding of less than the mandated 25 per cent.Raising the MPS in these 110 companies to 30 per cent will require promoters or companies to divest shares worth Rs1.35 lakh crore at current prices, estimates show.
A few years ago, most listed companies in India had a promoter holding of nearly 90 per cent. Such high holding often led promoters to benefit at the expense of minority shareholders, said experts.
In 2014, the government had notified rules for a minimum 25 per cent public shareholding in listed public sector undertakings (PSUs). To comply with these norms, over 30 listed PSUs were required to raise their public shareholding to 25 per cent by August 21, 2017. They have now been given another one year extension to meet the deadline.
Earlier in 2010, the non-PSUs were asked to attain a minimum 25 per cent public shareholding within three years, while the PSUs were told to raise their MPS to 10 per cent. Following the expiry of this deadline in June 2013, 105 listed companies were found to be noncompliant with these norms and necessary actions were initiated against them by the regulator.
A few weeks ago, too, Sebi had directed the stock exchanges to crack the whip on non-compliant companies, including imposing afine of Rs 5,000 per day and freezing the promoters´ shares.“Even today, in some companies, few institutional investors hold a sizeable chunk of the 25 per cent public float.
Widening the float will, to some extent, help correct this anomaly and help in better price discovery,” said Sai Venkateshwaran, partner and head, Accounting Advisory Services at KPMG India.High promoter holding remains the biggest hurdle in raising India´s weight among key global indices.
The MSCI Emerging Markets Index, for instance, uses the free float market capitalisation for assigning weight among countries.An increase in weight could potentially bring in millions of dollars in foreign institutional inflows.According to aMorgan Stanley report, India´s institutional ownership stood at 40.7 per cent at the end of June 2017, the highest level to date.

Promoter holding, on the other hand, stood at 45.6 per cent, the lowest since March 2001.India is somewhat peculiar when compared to other markets when it comes to high promoter holding, said experts.In developed markets such as the US, it´s generally the angel investors who invest first, followed by venture capital and private equity players.

Listing on the bourses is the last stage after the company has matured and typically gone through several rounds of fund raising.This means that by the time the company lists, the promoter shareholding is typically down to 20 per cent or less.To be sure, India is now seeing the emergence of several newage businesses, especially in sectors such as ecommerce, technology and health care, where the founders or promoters holding a minuscule stake in the company.As these companies tap the market, India´s free float is expected to rise.
The Business Standard, New Delhi, 07th November 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…