Listed companies, including PSUs, will be forced to sell shares currently valued at Rs 60,000 crore (RS 600 billion) by March 2011 to continue to remain listed, on account of the government's new norms for public holding.
This would include shares of state-run companies worth Rs 40,000 crore (Rs 400 billion). This is besides the Rs 40,000 crore divestment target set by the government for stake sale in PSUs, including through IPOs of giants like Coal India.
The new norms come at a time when most public offers, including by PSUs and MNCs like Standard Chartered Bank, received very poor response from retail investors, a trend attributed by top banker and HDFC Chairman Deepak Parekh to "over-pricing."
The government on Friday asked the companies to maintain at least 25 per cent of public holding to remain listed and reach this threshold limit by diluting a minimum five per cent a year.
The dilution can be less than five per cent in case the company meets the 25 per cent threshold limit in that year.
While there are about 180 listed companies that would need to increase the public holding, an up to 5 per cent stake dilution would necessitate sale of shares currently worth Rs 60,000 crore. The figure could be higher if companies offload more than five per cent stake.
The spate of stake sale would include offerings by PSU giants like NTPC, MMTC, NMDC, SAIL, Indian Oil, Power Grid Corp, Hindustan Copper, NHPC Ltd, Power Finance Corp, Nalco, Neyveli Lignite and Oil India.
Likewise, stake sale would be needed by private sector majors like Wipro, DLF, Mundra Port and Reliance Power, which in 2008 set a record by launching the biggest ever IPO in
India in terms of size as also demand, but performed poorly post-listing.
Analysts said the share prices of the listed entities that would have to divest shares this year could come under pressure when market opens on Monday.
In all, the companies would need to sell shares worth about Rs 200,000 crore (Rs 2,000 billion), as per present share prices, to meet the overall threshold limit of 25 per cent public holding.
The companies would get a maximum of five years to meet the guidelines, but most would make the cut in less than three years.
In about 50 companies, the shareholding to be divested is less than five per cent, while it is between 5-15 per cent for another 100 companies. However, promoters of about 30 companies would need to dilute over 15 per cent from their holding.
The promoter holding is highest in MMTC and Hindustan Copper, both state-owned, at over 99 per cent and the divestment of over 24 per cent is needed there.
