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Public Enterprises (SCOPE) opposes mandatory 25 per cent minimum public holding norm for listed entities  

PSUs' body opposes mandatory 25% public shareholding norm

New Delhi :: Standing Conference of Public Enterprises (SCOPE) is opposed to the mandatory 25 per cent minimum public holding norm for listed entities, fearing that this would lead to spate of follow-on public offer (FPOs) by public sector companies and lower their valuations. In a market flooded with FPOs, the unlisted public sector entities may not feel encouraged to list on the bourses, the SCOPE has said.“If at all the 25 per cent public shareholding norm is to be there, it has to be achieved at appropriate market conditions and only the board of directors should decide the extent of dilution and the timing. There should not be compulsion on percentage of dilution and the timing of the issue,” Dr U.D. Choubey, Director-General of SCOPE, told Business Line here. Complete autonomy should be provided to the respective boards of public sector entities in deciding the quantum of dilution and also the timing of their FPOs, he said.

Currently, there are 56 listed public sector entities, including 22 banks. Of the 34 non-banking listed public sector enterprises, as many as 20-21 entities had public holding of less than 25 per cent. In the case of public sector banks, the number of listed companies where the holding is less than 25 per cent is around 4-5.“Our estimate is that about two dozen public sector enterprises and banks will have to bring FPOs in the market. A five per cent dilution means about Rs 45,000 crore worth of equity will hit the market. The Government also wants unlisted public sector enterprises to list their shares.“So in all, we expect about Rs 1 lakh crore worth equity issuance will happen in a year only from public sector. Where is the appetite in the market to absorb so much? So flooding of the market with FPOs is not the right approach,” Dr Choubey said. The Government had recently made it mandatory for listed companies to raise their public shareholding to 25 per cent, with at least 5 per cent dilution a year. Such a move would attract more investors and also check share price manipulation, it was pointed out.

However, Dr Choubey said that the apprehension that public holding of less than 25 per cent would lead to market manipulation is uncalled for as there are many checks and balances in public sector system.“Public sector cannot be seamlessly put at par with the private sector in this regard. The apprehension that public sector will manipulate the market does not hold good (for public sector) as there are large many checks like audit, CAG, CBI, COPU, RTI etc,” Dr Choubey said.The mandatory 25 per cent public shareholding norm should not be applicable for public sector enterprises, he said. He was not opposed to the policy decision of getting more unlisted profitable PSUs to list in the bourses. “We are not shying away from listing of unlisted public sector entities. We are for it,” Dr Choubey said.Dr Choubey also said that he would soon meet the Disinvestment Secretary, Mr Sumit Bose, to explain why SCOPE was opposed to the mandatory 25 per cent public shareholding norm.

K.R. Srivats / The Hindu Business Line newspaper.

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