Nearly 87 actively-traded companies, including 75 private entities and 12 state-run units, are yet to comply with the minimum public shareholding (MPS) norms stipulated by the market regulator Sebi.
The Indian market has seen 44 OFSs (offer-for-sale) and eight IPPs (institutional placement programme) worth USD 9 billion since the announcement of an amendment to minimum public shareholding (MPS) norms.
"We estimate a further sale of around USD 1.9 billion by June-end deadline as 75 private sector companies are yet to comply with the 25 per cent MPS norms. Another 12 PSUs have to comply with the MPS requirement of 10 per cent by August 2013," Sanjeev Prasad, Senior Executive Director & Co-Head, Kotak Institutional Equities said in a report here.
In June 2010, the Finance Ministry amended the Securities Contracts (Regulation) Rules, 1957 (SCRR), raising the minimum public shareholding (MPS) requirement to 25 per cent for listed companies or those that proposed to list.
Listed companies that did not meet MPS norms would be required to increase public shareholding by at least 5 per cent a year until they meet the norm. In August 2010, the SCRR was amended again to revise public-sector companies' MPS norms to 10 per cent (from 25 percent) by August this year.
Sebi has allowed companies to take either one of the routes: FPO (follow-on public offer), OFS, IPP or bonus/rights issues-to comply with the revised norms. A company wanting to take any other route must take SEBI's permission before doing so.
"We estimate that there could be supply of USD 1.8 billion by June-end and USD 2.5 billion by August to comply with the Sebi guidelines. This could be near-term headwind to the market rally," Bank of America Merrill Lynch said in its report on investment strategy.