Promoters of listed companies that are not compliant with public shareholding norms may find it tough to divest stake through avenues other than those mandated by the regulator. This is even after the regulator has said that it will look into such proposals on a case-to-case basis.
According to persons familiar with the development, approvals for such proposals will only be an ?exception rather than the practice?. Sources add that the Securities and Exchange Board of India (Sebi) will give the go-ahead only if it is fully convinced that the company cannot divest through the existing ways in which such stake dilution is allowed. This is in contrast to the perception that the regulator would give the go-ahead for other easier ways of stake sale.
?We have said that we will examine on a case-to-case basis, but that will be only after companies are able to convince us that dilution by any of the available means is just not possible,? said a senior Sebi official. ?Only then will we allow the company to use any other avenue. So, it is not that companies will submit an application and we will grant approval,? he added.
Interestingly, Sebi, in a circular issued on Wednesday said that ?listed entities desirous of achieving the minimum public shareholding requirement through other means may approach Sebi with appropriate details… Such requests would be considered by Sebi based on merit?.
According to the minimum public shareholding norms, promoters of all listed private entities have to bring down their stake to 75% by June 2013. The deadline for public sector companies has been fixed at August 2013.
Early this month, the market watchdog allowed such stake sale by way of bonus and rights issues. Earlier, offer for sale (OFS), institutional placement programme (IPP) and follow-on offer were the only ways in which promoters could dilute stake to comply with the regulatory requirement.
This assumes significance as Sebi chairman UK Sinha has on numerous occasions in the past said that there will be no extension of the deadline as the norms were announced three years ago and companies have had enough time to comply with the requirements. There are around 180 private listed companies wherein the promoter holding is more than 75%.
There have been reports that the regulator is mulling whether qualified institutional placement (QIP) and preferential allotment can also be included in the list of ways in which promoters can dilute stake to comply with the public shareholding norms. Sebi, however, is yet to take a final decision on these issues.