In what could trigger a slew of follow-on offers, the finance ministry has started the process of drafting rules for listed companies to increase public holding in case promoters hold more than 75 per cent stake.
The draft will be released soon for public comments and the framework in this respect is expected to be out by December-end.
"The process (to draft rules) has started...The framework would be ready by this year-end," an official source said.
The government has to amend the Securities Contracts (Regulation) Rules for the purpose, sources said. And once the framework is out, a slew of follow on public offers is expected to hit the market as about 180 companies have less than 25 per cent public holding.
The ministry would come out with draft rules soon, sources said, adding, it would be made public for inviting comments. Normally, time given is three weeks.
The process is expected to be complete by December. By then, the government would be notifying the amendments in SCRR, the sources said.
In this fiscal's budget speech finance minister Pranab Mukherjee had said that the average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings.
"This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies," Mukherjee had said.
Among the leading PSUs where promoter or government holding is well above 75 per cent are MMTC, NMDC, Hindustan Copper, Power Grid, NTPC, SAIL, Shipping Corporation, Neyveli Lignite.
In the same league are some of the private companies like Wipro, DLF, Reliance Power, Mundra Port, TCS and IL&FS.
The rules provide for the requirements which have to be complied with by public companies for the purpose of getting their securities listed on any stock exchange.
One requirement seeks to ensure the availability of a minimum portion/number of shares (floating stock) of the listed securities with the public so that there is a reasonable depth in the market and the prices of the securities are not susceptible to manipulation.
The SCRR seeks to achieve this by prescribing a minimum part of the issue to be offered to public by the company seeking listing on a recognised stock exchange.
The listing agreement entered into by a company with a stock exchange requires the former to ensure minimum non-promoter holding on a continuous basis.
Currently, the norms prescribe that at the time of listing at least 25 per cent of shares be given to public for subscription.
The other option is that at least ten per cent of shares are given to the public, provided that minimum 20 lakh securities are offered, the size of the offer is a minimum of Rs 100 crore and the issue is made only through book building method with allocation of 60 per cent of the size to the qualified institutional buyers.
