In a significant relaxation of listing rules, the Securities and Exchange Board of India on Thursday exempted a host of companies from the minimum 25 per cent public shareholding requirement.
Companies with market capitalisation of Rs 1,000 crore (Rs 10 billion) and those having 20 million shares listed have also been exempted from the norm.
Companies which issued shares in initial public offers under Rule 19 (2)(b) of the Securities Contract (Regulation) Rules 1957 (SCRR) and those intending to get listed under the rule have been excluded from the requirement of having at least 25 per cent public shareholding.
Rule 19 (2)(b) provides that a company can get listed with just 10 per cent holding with the public provided the minimum net offer to the public is Rs 100 crore (Rs 1 billion), a minimum of 20 lakh (2 million) shares are offered to the public in an IPO through book-building method and allocation to qualified institutional buyers is 60 per cent of the size of an issue.
The rule was initially applicable to technology companies and, subsequently, companies across all sectors were brought under its purview.
The rule has been resurrected through a communication to the stock exchanges by Sebi, revising the minimum public shareholding norm.
The revised norms will provide relief to several companies, including software majors Wipro and TCS.
In a communication to the stock exchanges, Sebi said companies which at the time of initial listing had offered less than 25 per cent but not less than 10 per cent of the total number of issued shares in terms of Rule 19 (2)(b) of Securities Contract (Regulation) Rules 1957 (SCRR), or companies desiring to list their shares by making an IPO of at least 10 per cent in terms of Rule 19 (2)(b), will be exempted from the norms. The new guidelines on revising Clause 40A of the equity listing agreement will come into force on May 1.
The exempted companies will be required to maintain the minimum level of public shareholding at 10 per cent of the total number of issued shares for the purpose of continuous listing.
This requirement will not be applicable to government companies as defined under the Companies Act, infrastructure companies as defined under Sebi guidelines and to companies referred to the Board for Industrial and Financial Reconstruction.
The "public shareholding" for the purpose of continuous listing will continue to comprise shares held by entities other than promoters and promoter groups and shares held by custodians against which depository receipts are issued overseas.
Companies, which do not meet the minimum public shareholding norm will be allowed a transparent mechanism to achieve compliance.
The mechanism for increasing the public shareholding to the minimum level would provide for various modes of issuing shares in the domestic market and a reasonable time period, as approved by the stock exchanges, Sebi said.
The market regulator has also revised the reporting format for shareholding patterns. Shareholding patterns will now be indicated under three categories - shares held by promoters and promoter groups, shares held by the public, and shares held by custodians and against which depository receipts have been issued.
Details such as the number of shareholders, the number and percentage of shares held and the number of shares held in the dematerialised form will have to be given for all the three categories.Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Investments Discussion Group