Indian primary stock market — presently facing poor investors responses — could be flooded with fresh issues if government’s proposal for 25 per cent public holding is implemented in one go because the average individuals’ holding is mere 1.81 per cent in PSUs as against 13.56 per cent in private firms, an study released by Assocham  said on Saturday. 

An Analysis of Nifty and Sensex Companies done by the ASSOCHAM reveals that while 94 per cent of these already satisfy the minimum 25 per cent of non promoter share criteria along with holdings of qualified institutional bodies, only a handful meet the ‘public’ quota as proposed by the Finance Ministry.

If the share of FI’s, FII’s, MF’s, Employees, NRI’s/OCB’s, Private corporate bodies is kept out from the ‘non-promoters’, the  average individuals’ holding is far below the limit under the amendments in the Securities Contracts (Regulation) Rules, 1957  (SCRR). Implementation of the proposed changes in the Act, will lead to a huge flow of IPOs and Follow-on offers by a large number of companies into the primary markets, the chamber projects. The study has revealed that only two companies among Sensex and Nifty scrips satisfy the proposed criteria of 25 per cent of ‘public’ shareholding- Bajaj Auto and Larsen & Tourbo with a share of 27.7 per cent and 35.5 per cent respectively.

Major stakeholders

In majority of the companies, FIIs occupy the maximum share of non-promoter holdings which fall in a range of 60 per cent to 40 per cent. These are followed by insurance companies with a range of 20 per cent to 5 per cent and mutual funds ranging between 3 to 1 per cent. Interestingly, the average individual shareholding of the public sector companies is only 1.81 per cent which is far less than the average individual’s share of 13.56 per cent in the private sector companies. Among the Sensex  firms, the average retail shareholding was estimated by the chamber to be 11.89 per cent and 10.08 per cent among the Nifty companies.

The Finance Ministry has proposed raising the ‘public’ shareholding limit for listed companies from the existing 10 per cent to at least 25 per cent in a move to encourage more public participation, transparency and overall governance in the market. With the implementation of proposed changes in the Act, the listed firms will have to dilute their shares within a period of three months.