Public float in listed cos to be hiked to 25%

The Finance minister’s proposal to make it mandatory for companies listed on stock exchanges to maintain a minimum public holding of 25 per cent is likely to result in many companies — including both public and private — offering more shares to the public. This means the government will have to offload shares worth Rs 31,000 crore of state-run NMDC — which has a market value of Rs 126,178 crore — to bring down the government stake from 98.38 per cent to 75 per cent.

The new proposal assumes significance as many companies are just diluting about 10 per cent of their stake through public offers at a high premium. In many big companies, public holding is between 5 to 15 per cent. Close to 10 per cent of more than 2,000 actively traded stocks at the BSE and the NSE have a non-promoter holding of less than 25 per cent.

“The plan is to have as much as 25 per cent of non-promoter holding of listed companies in the stock market in a phased manner. This will broaden the base of security markets as it is not very large and the same kind of stocks are floating around. This will be applicable to both private and public companies,” finance secretary Ashok Chawla said in New Delhi on Tuesday.

Finance minister Pranab Mukherjee said the average float in many 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,” he had said in his Budget speech on Monday.

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