Markets

SEBI talks tough against PSUs that fail to meet public float norm

Our Bureau New Delhi | Updated on July 16, 2013 Published on July 16, 2013

SEBI Chairman, U.K. Sinha. (file photo)

After taking action against over 100 companies, the market regulator, the Securities and Exchange Board of India, on Tuesday said public sector undertakings not fulfilling the norms of minimum 10 per cent public shareholding, would face action.

However, the regulator said the Government had assured it of meeting the norm by the due date, i.e., August 8.

All listed PSUs are required to fulfil the minimum public shareholding norms, after which the Government will hold a maximum of 90 per cent, while the remaining will be owned by the general public, banks, financial institutions or mutual funds. There are at least 10 PSUs that still have to fulfil these norms. Earlier, SEBI set the deadline of June 3 for private companies and had taken action against the promoters and directors of 105 non-compliant companies.

Asked whether SEBI would initiate stringent action against non-compliant PSUs as well, SEBI Chairman U.K Sinha said: “Yes, but I will also like to say that the Government has assured me through a letter that they are going to implement it.” The Government had earlier told SEBI that the rules could be relaxed for loss-making PSUs, but the regulator had insisted on all listed entities meeting these norms.

“Our position is very clear. Any company which violates SEBI’s minimum public shareholding guidelines and defaults should be punished,” Sinha said during a conference on venture capital investments.

Safety Net

On safety measures for investors, Sinha said no decision had been taken on the mandatory safety net mechanism for retail investors. “It will take some time, as there are reservations against it,” he told reporters after his address to the conclave of Indian Venture Capital Association. A voluntary safety net system is already in place.

SEBI has proposed a safety net for investors putting in Rs 50,000 or less in an initial public offer, which will provide for a company purchasing shares, if the price goes 20 per cent below the issue price. The price for this provision will be calculated as the volume-weighted average market price of such shares for a period of three months from the date of listing.

Further, the 20 per cent depreciation in share price shall be considered over and above the general fall, if any, in market index.

Sinha also said that a final decision on new regulations for Put and Call Options was expected soon. “The Government’s procedure is taking a long time. But I have been assured that the Government will take action soon,” he said. The Law Ministry has already cleared the proposal.

shishir.sinha@thehindu.co.in

Published on July 16, 2013
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