Industry chambers have reacted cautiously to the proposed move by the finance ministry to modify the Securities Contract Regulation Rules. The ministry has proposed to make it mandatory for companies listed on stock to retain a minimum of 25% of their share as public holding to stay listed.
Indicating that ?public? should include retail investors only, the ministry has also called for a review on whether FIIs, financial institutions, mutual funds, NRIs and overseas corporate bodies should continue to be included in definition of ?public?.
While Assocham was quick to welcome the move, CII and Ficci were cautious in their reaction.
?Assocham welcomes this proposed move of the finance ministry, which will allow public to own a larger proportion of shares in the company and consequently facilitate larger participation of public in the stock market. As for the proposal regarding exclusion of FIIs from the current definition of ?Public? goes, the government is considering a separate slot for FII. This larger participation of public will ensure that the market doesn?t strictly remain regulated by FIIs,? Assocham president Venugopal Dhoot said.
When contacted, CII officials reacted cautiously. Referring to the possible exclusion of mutual funds from the definition of ?Public? they stated ?at a time when government wants retail investors to be guided by the expertise of institutionalised set ups like mutual funds, this proposed move doesn?t augur well.? Ficci decided to reserve its view for the time being. ?We are talking to our members,? said Ficci officials.
The finance ministry has sought reactions on the proposal by the end of February. It also suggested that there should not be any discrimination between a government company and non-government company. The power of the stock exchange to relax any of the conditions of listing with the prior approval of Sebi in respect of a government company needs to be withdrawn. Punit Shah of PWC has called this move a step towards more transparency.