The Hindu Business Line : FICCI opposes proposal for 25% public holding for listing

The Federation of Indian Chambers of Commerce and Industry (FICCI) has opposed the proposed norm that stipulates a public holding of 25 per cent for a company to be listed and continue to remain listed in a stock exchange.

The opposition stems from the fact that the proposed norms would force the promoters in a number of listed entities to dilute their stake to 75 per cent or much below the 75 per cent levels.

This is because the proposed norms do not favour the inclusion of ADRs, FII, FI and mutual fund holdings within the definition of public float. All these are currently counted as ‘non-promoter’ holdings.

‘Non-promoter’ holdings

If the proposed norms come into force, the promoter group of companies such as Wipro, Tata Consultancy Services and Jet Airways would be required to dilute their holdings in favour of public in a big way.

In fact, analysts highlight that most of the companies forming part of the sensex would fail the 25 per cent retail (public) shareholding test.

Proposed norms

“The proposed norms would require the promoters to dilute their holdings in favour of public to serve the objective of larger public float and deepening the market. Our view is why make the promoter dilute his stake?

“Why not the non-promoters such as FIIS, MFs and FIs be made to dilute their holding to public to ensure public holding of 25 per cent stake?,” sources in the chamber said.

FICCI has submitted to the Finance Ministry that the proposed norms should not be pursued at all. The chamber is of the view that the current level of minimum 25 per cent non-promoter shareholding should be continued.

This would imply that promoter could have shareholding of up to 75 per cent and that public stake be included within the overall limit of 25 per cent.

New norms to be set up

If the new proposals cannot be dropped, FICCI has alternatively suggested that SEBI be given the flexibility to exempt companies that have a large market cap. It has also been recommended that the regulator can set a norm for defining the size of this market cap.

FICCI has also pointed out that Indian companies would be at a disadvantage vis-À-vis foreign companies seeking to issue Indian depository receipts in India under the Companies (Issue of Indian Depository Receipts) Rules 2004.

The chamber is of the view that the IDR rules should also have minimum public float norms and only then would there be parity between Indian companies and foreign issuers.

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