Industrialists unhappy over public stake hike in listed firms

March 9th, 2008 - 1:49 pm ICT by admin  

New Delhi, March 9 (IANS) Leaders of Indian industry have expressed concern over the finance ministry’s proposal that the listed and to be listed companies should have a minimum public holding of 25 percent. “The government wants to increase the public holdings in listed companies to 25 percent from 10 percent now by introducing an amendment in the 1957 Act within a period of three months which is too short to be complied with. This will also create resource generation problems for listed companies,” said Venugopal N. Dhoot, president, Associated Chamber of Commerce and Industry of India (Assocham).

It has therefore suggested that the hike be carried out in a phased manner over a period of five years.

The same regulations should be applied for public holdings increase in both government and private sectors, said Assocham.

“The current level of minimum 25 percent non-promoter shareholding for continuous listing should be continued, i.e. promoter could have shareholding of up to 75 percent. The public stake should be included within this overall limit of minimum 25 percent,” said the Federation of Indian Chambers of Commerce and Industry (FICCI).

Such a proposal takes into account various issues and hence before implementing this the government should thoroughly examine the same, FICCI said.

The chamber also said the hike in public holding could be done in a number of ways such as by offering sale through the initial public offering (IPO) tool, direct sale by promoters in the capital market, issuing fresh shares and also by buying back the shares by the company.

Contrary to the government’s proposal of a three-month period, this should be implemented over a period of two years and its timing should be in tandem with favourable conditions of the stock markets, said FICCI. Otherwise it will lead to huge loss of investors’ money.

“The relaxation of minimum public float being reduced to 10 percent has helped the investors to invest in blue chip companies who would have otherwise decided not to list their shares in case a higher threshold had been prescribed for listing for such companies,” it said.

It has also asked the government to give more powers to the market regulator, Securities and Exchange Board of India (SEBI), in determining the threshold limit for public holding.

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