The government's move to enforce a minimum 25 per cent public holding in all listed firms should be put on hold for another three months, as a lot of "grey areas" need to be cleared, CII President Hari S Bhartia said on Monday.
"Large cap firms, in fact all the companies, should definitely be given more time. The government can give three months' time. The policy announcement of June 4 can be treated as the concept paper on which views of different stakeholders can be sought," Bhartia said.
According to the new rules, both public and private sector listed companies will have to increase their public participation to at least 25 per cent.
The companies can achieve this threshold over a period of years but will have to offload at least five per cent per annum.
Bhartia said while it is a good move in the long run and will help the government's disinvestment process, in the short-to-medium term, there would be crowding out of resources.
"Too much paper (initial public offerings and follow on public offers) will chase the same money," CII chief said, adding that wider industry consultations should be held in the next few months before implementing the new rules.
He said the grey areas on which clarity is required included the treatment of the private equity investment.
The stock market has reacted negatively to the new norms that were announced after market hours on Friday.
The benchmark sensex was trading 300 points lower in the afternoon.
"We are living in uncertain times. We have to be cautious," Bhartia said.
However, according to CII Chief, the move will help the government consolidate its fiscal position further after raising Rs 67,719 crore (Rs 677.19 billion) from the auction of the third generation radio frequency (3G spectrum).
