Sebi hikes PSU public holdings

The Securities and Exchange Board of India (Sebi) on Thursday announced a slew of reforms — particularly in the primary market space — to infuse life into the moribund initial public offering (IPO) market.

A major decision taken by the Sebi, which met on Thursday in Delhi, was to extend the 25 per cent minimum public shareholding requirement to state-owned companies. Currently, the rule applies only to private sector companies. The previous minimum public float requirement for public sector undertakings (PSUs) was just 10 per cent.

The move will impact as many as 36 PSUs, where the government currently owns more than 75 per cent. Some of the biggest dilutions will have to be made in Coal India, NHPC and NTPC, to name a few. The move is expected to help the government raise close to Rs 60,000 crore through sale of excess shares in 36 state-run firms. Sebi Chairman U K Sinha made it clear that the government will be given a three-year time frame to achieve 25 per cent minimum public shareholding (MPS). The deadline for private companies to have at least 25 per cent MPS had ended in June 2013.

In order to encourage more promoters to tap the IPO market, the capital market regulator has relaxed the minimum dilution criteria. Companies can now sell a minimum 25 per cent stake or Rs 400 crore, whichever is more, in public offerings. 

Further, the regulator has extended the ambit of the popular offer for sale (OFS) mechanism for share sales. Sebi has said that top 200 companies will now be allowed to divest using the OFS route. Earlier, only top 100 companies were allowed to use the OFS route for share sales other than those wanting to achieve MPS requirement.