The finance ministry?s proposal for a minimum non-promoter, public shareholding of 25% in the listed companies is a welcome step as deep non-manipulative markets require larger and diversified public shareholdings. The Finance Minister made the same point strongly in his budget speech. Though final guidelines are yet to to be worked out, its implementation will be quite a challenging task for the companies given the tight liquidity situation in the financial markets.

Currently there are a total of 180 listed companies which have a non-promoter public shareholding of less than 25%. And the total value of the promoter stake sale to meet the regulatory requirement is pegged at Rs 1.59 lakh crore. Already we are witnessing companies grappling to mop up funds for their operational and growth requirements.

So far around 13 companies have raised Rs 12,500 crore through the QIP route. One issue of GMR Infra was withdrawn failing to get enough response from institutional investors and the fate of others who have lined up to raise funds through this route totaling over Rs 40,000 crore is unknown. Adding to it, over 30 companies have lined up to tap the primary market to mobilise capital amounting to Rs 8,800 crore in coming months. With the market and the economy in a recovery mode, we can expect more and more companies to tap the capital market to meet their growth requirement.

Against this background, the key question here is whether the market has that much appetite to absorb such enormous amount of promoter stake sale. In view of the above factors, the ministry?s proposals will definitely take a much longer time, say more than two or three years, to get fully implemented.

Since the proposal from the finance ministry contains strict enforcement actions including delisting if companies fail to adhere to the prescribed norms, the coming months would witness a major battle between companies to grab a pie of the available liquidity. For one set of corporates it will be a battle for survival for continued listing, while for the others it will be in search of growth capital.

?bijith.r@expressindia.com