Sebi gives a boost to PSU divestment with 25% public shareholding norm

The government's divestment policy got a big boost with market regulator Securities and Exchange Board of India (Sebi) insisting that state-owned firms should also adhere to the mandatory 25-per cent public shareholding norms that are applicable to private companies.

This would help the government to offload big chunks of PSU equity into the market instead of the 5 per cent or 10 per cent equity sold at divestments at present.

"We are talking to the government that the minimum public shareholding guidelines should not be depended on who the owner is," Sebi chairman UK Sinha said on the sidelines of a capital market summit organised by industry body CII.

''The Sebi regulations should be neutral to ownership. Our objective is that the same set of rules should apply to all companies, including those owned majority by the government," he added.

Sinha said Sebi has already taken up the issue with the government that there should be a minimum float of 25 per cent shares if it wants a PSU to be listed. "Our stand as a regulator is that all companies should be treated alike on all matters, not only public float on corporate governance and all and this is what we have been telling the government," Sinha said.

At present, government-owned companies are allowed to get listed on a minimum threshold level of 10 per cent equity ale while private sector companies are mandatorily required to have at least 25 per cent public shareholding.

The 25 per cent public float norm implemented last fiscal had forced several blue chip companies to bring down promoter holdings.

There are nearly 30 listed PSUs where public investors hold less than 25 per cent shares. These include Coal India, SAIL, MMTC, NHPC, NMDC and SJVN.

The move is part of SEBI efforts to deepen the market and increase public shareholding while at the same time giving a boost to government's efforts to raise funds through divestment.

Sinha said, the government is expected to announce tax breaks for PSU investments after which SEBI would issue the final guidelines.

SEBI, he said, will soon finalise its recommendations on infrastructure investment trust. Besides, it is working on a stronger set of insider trading regulations and delisting norms, Sinha said.