Government can exempt any listed PSU from minimum public holding

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The government can now exempt any listed public sector enterprise from the minimum public shareholding norm, which mandates at least 25% public float for all listed entities. The move comes as the government prepares for the initial public offer (IPO) of Life Insurance Corp (LIC) of India, likely to be the biggest listing ever.

The government has inserted a new rule in the public listing norms specified in the Securities Contracts (Regulation) Rules, 1957, toward this end.

“Notwithstanding anything contained in sub-rules (1) to (5), the central government may, in the public interest, exempt any listed public sector company from any or all of the provisions of this rule,” said a notification issued by the Department of Economic Affairs, part of the finance ministry. The framework for the minimum public shareholding has been revised to make it easier for large companies to launch IPOs.

“It’s an enabling provision,” a government official told ET.

The mandatory minimum public shareholding was raised to 25% from 10% in FY10 with a carveout provided for public sector units (PSUs) from the norm, which was amended in 2014 to bring them on par with private listed entities. Listed PSUs were given until 2017 to comply, a deadline extended to 2018, to 2020, and then to this month.

Stock exchanges can impose a fine of up to Rs 10,000 on companies for each day of non-compliance with the requirement. They can also ask depositories to freeze the entire shareholding of the promoter and promoter group.

Norms under Examination

Securities and Exchange Board of India (Sebi) chief Ajay Tyagi said on Wednesday that the regulator was looking at the matter.

“We are examining what is minimum public shareholding and what is the actual float… that we are examining separately with exchanges — all of this as a concept level, 25% minimum shareholding, whether it means 25% free float or not,” Tyagi had said at a Ficci conference.

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