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25% public float: SEBI rules out extending time limit

Taking a strong stance on public float, the capital market regulator SEBI today ruled out extending time limit for the mandatory 25% public holding for both public as well as private companies and said they will have to adhere to the guidelines issued earlier.

“Companies will have to see that public shareholding is 25 percent as per the time-frame. As far as listed private sector companies are concerned, it is June 2013 and for the public sector undertakings it is August 2013,” SEBI chairman Upendra Kumar Sinha told reporters on the sidelines of a function organised by the Indian Merchants’ Chamber here.

Some companies, he said, “feel that the SEBI will relax this. But let me tell you, I am going to make it difficult (for them).”

Under a notification of the Securities Contracts Regulations (Amendment) Rules issued in 2010, the government made it mandatory for all listed entities to have a minimum public float of 25% and also stipulated the time limit.

There are 181 private sector companies that do not meet the minimum shareholding norms as of now, Sinha said, adding, “around Rs27,000 crore will have to be mobilised by June 2013, and 16 PSUs (which don’t have 25% public holding) will have to mobilise Rs12,000 crore to adhere to the new public float norms.”

On revamping of the initial public offering (IPO) process, which has been pending for quite some time now, Sinha said, “it will be done in three-four months.”

SEBI is currently streamlining the entire IPO procedure following instances of diversion of IPO proceeds by promoters, price manipulation on the listing day, poor due diligence and inadequate documentation among others.

Sinha also said SEBI will soon come up with a new set of guidelines including shortening the time period for completing the IPO process.

On the issue of MIMPS (manner of increasing and maintaining public shareholding in recognised stock exchanges), he said the regulator will come out with the needed guidelines in the next two months.

Under the MIMPS regulations, there is a mandatory public shareholding norm for a stock exchange to ensure there is no conflict of interests.

Incidentally, one of the main reasons for SEBI to deny permission to the Financial Technologies-promoted MCX-SX to launch an equity trading platform was the higher shareholding by the promoters.

According to experts, the new regulations will be keenly watched by market players as this would determine the fate of MCX Stock Exchange.

Meanwhile, Sinha refused to comment on the controversy relating to general anti-avoidance rules (GAAR), proposed in the Budget to check tax evasion that has adversely impacted the stock markets sentiment.

“That (GAAR) is between the government and the affected parties (FIIs). The SEBI has no direct role in it, so I will not be able to comment on this,” Sinha said.

On revising of the consent order norms, the SEBI chief said, “new consent order guidelines will be out in the next four weeks.”

The consent order regulations allow defaulting parties to settle disputes with SEBI on payment of an agreed fine but without admitting to the alleged malpractices. The mechanism has evoked criticism from several quarters.

Stating that the market regulator is not opposing high frequency trading (also called algorithmic trading), Sinha stressed, “we will have to ensure that risk part is well understood and enforced. And the stock exchanges will have to take it seriously,”.

Short URL: http://www.cckerala.com/?p=8356

Posted by on Apr 13 2012. Filed under Business India News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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