Public shareholding norms for public sector companies would be brought on a par with their private sector peers, said Sebi chairman UK Sinha, which would unlock sizeable funds for the government with estimates suggesting the cache could be in the order of Rs 50,000 crore.
“We are talking to the government that the minimum public shareholding guidelines should not depend on who the owner is,” said Sinha on the sidelines of a capital market summit organised by industry chamber CII in Mumbai.
Under current rules, while the private sector companies have to maintain minimum public shareholding of 25 per cent, government owned companies are required to have only 10 per cent public shareholding.
A look at the six leading PSUs — Coal India, NMDC, SAIL, NHPC, IDBI and Neyveli Lignite — that have government shareholding of over 75 per cent shows that if the stake is brought down to 25 per cent, the treasury could be richer by Rs 48,000 crore at Wednesday’s close.
“A higher public holding in PSUs will not only deepen the market, it will lead to higher transparency and better disclosures,” said Prithvi Haldea, chairman, Prime Database. He however added that Sebi should ensure that it is offered through the FPO route only to retail investors and at a discount of 10-15 per cent. “That would also fulfill Sebi’s aim to increase investor base,” said Haldea.
Sebi also unveiled a host of reforms to deepen the capital markets and safeguard the interests of investors.
They include new norms for REITs (real estate investment trusts), ESOPs (employee stock ownership plans), infrastructure investment trusts, rectification of anomalies in the IPO markets and integration of KYC (know your customer) norms.
“Revised norms for ESOPs are on the way… this would be progressive and would resolve existing anomalies,” Sinha said in his address. Sinha said the regulator is also finalising proposals for infrastructure investment trusts. Sebi had already issued a consultation paper on allowing infrastructure investment trusts in India. The suggested framework is on the lines of the business trust model followed by Singapore and Hong Kong and master limited partnerships in the US.
Sinha said that KYC across the financial sector would be integrated with the cooperation of all other financial sector regulators. This means KYC approved by one regulator would be accepted by other regulators.
As a part of measures to boost primary market sentiment, Sebi plans to correct the anomaly in the minimum issue size of IPOs. Currently, all companies with a post-issue capital of below Rs 4,000 crore are required to offer at least 25 per cent stake in the IPO. Companies with a post-issue share capital over this figure are required to offer at least 10 per cent. In view of this anomaly, there is a tendency to show valuations is over Rs 4,000 crore plus. “We are trying to remove this anomaly very shortly,” Sinha said.