Fresh public issues likely for PSU power firms

In line with its Budget proposals the Government of India has amended the Securities Contracts (Regulation) Rules 1957, making it mandatory for all listed companies to maintain a minimum public holding of 25%, a move that would, inter-alia, call for a fresh round of divestment in government stake in the leading power PSU`s viz. NTPC, NHPC, Power Grid Corporation of India Limited (PGCIL) and Power Finance Corporation (PFC). Public holding in all these companies, presently, stands below 20%. As per the latest shareholding data available with the stock exchanges, NTPC has the highest 18.33% public-stake, followed by NHPC and PGCIL, with 15.78% public holding, each, while the same for PFC stands at 11.38%. All these PSU have issued public offers during the last three fiscals.

The new rules were announced shortly after the close of stock market, on Friday. As per the new norms, all listed companies are necessarily required to maintain a minimum public float or non-promoter holding of 25% and listed companies that have less than 25% public holding have to reach this level by adding 5% public share, each year. Further, for a company seeking listing, would have to dilute 25% in one go, in case the issue size is up to Rs 4,000 crore. However, those who are already in the process of going public and have filed draft prospectus with the Securities and Exchange Board of India (SEBI) on would be required to comply with the 25% threshold requirement, increasing its public shareholding by at least 5% per annum.

Out of a total of around 4,500 listed companies in India, at least 180 companies, including 35 PSUs, will have to offload its promoters` stake to meet this revised norm. Reliance Power Limited, Jaiprakash Power Ventures are the among the leading private sector power firms that would need to increase public-holding in their firms. Explaining the rationale behind this amendment the Finance Ministry said, "A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation." The Finance Minister in his Budget speech for 2009-10, proposed to raise the threshold for non- promoter, public shareholding for all listed companies. To implement the Budget announcement the Securities Contracts (Regulation) (Amendment) Rules, 2010, have been notified, said an official disclosure.