Sebi allows firms to tap bonus, rights routes

Providing more routes to firms finding it tough to attain minimum 25% public holding, Sebi today allowed them to dilute shares through two more avenues, bonus shares and rights issue, and hinted that further leeway could be provided on a case-to-case basis.

Sebi has made it mandatory for the promoters of listed companies to dilute their holding to a maximum of 75% by June next year, so that a minimum 25% public shareholding can be maintained at listed private companies.

The move would help government to sell shares in already listed companies.

However, adverse market conditions have made it difficult for the promoters to dilute their shareholding and the only avenues available to them currently are FPOs (Further Public Offer) and the newly launched Offer for Sale (OFS) and IPP (Institutional Placement Programme).

Announcing wide-ranging changes in its regulations, Sebi today said its board has decided to offer the companies two more avenues to fast-track the sale of promoters’ equity in listed companies to meet minimum public shareholding norm.

“Sebi has decided to allow two more avenues for meeting minimum 25% shareholding norms. These avenues are bonus shares and issue of rights share,” Sebi chairman UK Sinha told reporters after a meeting of regulator’s board.

He further said that if there is any difficulty faced by any corporate, the Board can take decisions on a case-to-case basis.

However, the shares issued through bonus and rights issues to meet minimum public holding norms cannot be allotted to the promoter group entities.

Sinha said that a promoter of any listed company can also offload 10% to alternate investment funds registered with the market regulator.

However, the normal lock-in requirement which was required for promoters would also apply to these investors as well.

Institutional Placement Programme (IPP) and Offer for Sale of Shares, popularly known as auction routes through the stock exchange, are the other two modes available with the promoters in order to comply with the minimum shareholding norm. These were introduced earlier this year, but responses have been mostly tepid so far.

In late 2010, Sebi came out with norms saying government firms should have a minimum public shareholding of 10% and the private companies 25%. The deadlines were set for August and June 2013, respectively.