Raise minimum public holding for PSUs to 25%: Sebi to finmin

Written by fe Bureau | Mumbai | Updated: May 29 2014, 10:47am hrs
The Securities and Exchange Board of India (Sebi) is learnt to have written to the finance ministry suggesting that the minimum public shareholding for government-owned companies be raised from 10% to 25%.

It is reported that the ministry is considering the proposal that also suggests a three-year time-frame for PSUs to comply with this norm.

Currently, there are 33 PSUs where the government holding stands at more than 75%. The government may end up raising more than R40,000 crore by the suggested stake sale, considering the average trading price of these companies over the last one year. The top 11 contenders for such dilution that can each raise more than R500 crore include miners Coal India and NMDC, and metal producers, SAIL, Hindustan Copper and Nalco. Given that the market trajectory plays a crucial role in generating investor interest in a PSU, the government may be tempted to consider the proposal. The Street's liking towards cyclical stocks, which analysts are projecting to lead the earnings upgrade in coming years, may also support the decision.

During 2013, the government sold shares in seven PSUs through OFS. While stake sales in NTPC and SAIL two of the biggest for the year that took place in quarter ended March 2013 added close to R12,900 crore to the government kitty, LIC is believed to have supported the dilution, especially in case of SAIL. According to BSE filings, LIC's stake in SAIL jumped from 4.93% to 7.94% during that quarter while that in NTPC increased from 6.2% to 7.66%.