Corporate India protests SEBI’s 25% public holding norm

Indian companies are none too happy about the SEBI regulation that mergers and acquisitions must involve a 25-per cent public offering, according to Assocham, the associated chambers of Indian industry.

Assocham has sought three more months to meet the Securities & Exchange Board of Inda regulation on minimum public holding. The regulator has set 3 June as the deadline for complying with the rules.

A newspaper report says about 100 companies have failed to comply with the SEBI diktat. The promoter groups of these companies were restrained from raising funds from the market and also barred from selling or buying their company's shares or receiving dividends over the 75 per cent ceiling.

Describing the action against promoters as harsh, Assocham has pleaded with SEBI to give companies at least three more months to comply with the guidelines.

''While it is true that it has been three years since the SEBI had asked listed companies to increase their public holdings, it must also be realised that selling stocks in the marketplace is a function of sentiment - or else the promoters would be compelled to offload equity at a distress price. This is particularly true about the small and mid-cap companies,'' said Assocham secretary-general D S Rawat.

Though many companies managed to meet the guidelines in the last few months before the deadline expired, a score of mid- and small-cap companies missed the deadline; and their shares were hammered.

In the process of punishing the promoters, there has been collateral damage to minority shareholders too, as market sentiment around these companies has been hit hard, eroding the wealth of shareholders, who had no say in the issue at all, said Rawat.

Assocham wondered whether the market regulator would be able to take similar harsh measures against the government in case the PSUs with more than 90 per cent government holdings do not divest in favour of the common investors.

''If the PSUs miss the deadline of 9 August, will SEBI punish the largest shareholders in them (the government)?'' Rawat wondered.

''It remains to be seen how far SEBI will be able to ensure a level playing field when it comes to the treatment of private sector companies vis-à-vis public sector firms,'' he said.