Indian public companies will not have to maintain 25% public holding to remain listed

On August 9, 2010 Indian government set a new rule that exempts the state-run companies to maintain a minimum of 25 percent public holding to remain listed.

In just two months, the Finance Ministry made the change in order to avoid several problems regarding initial or follow on offers that would affect the disinvestment program of the government.

Under the new system, Central Public Sector Units (CPSUs) will have to maintain at least 10 percent public holding and are required to increase its public stake to 10 percent in the next three years in case they do not meet the new diluted norm.

Firms who are yet to be listed on can dilute 10 percent stake to the share market at one go. The Finance Ministry said, "A public sector company shall offer and allot at least 10 per cent of each class or kind of equity shares or debentures convertible into equity shares to the public in terms of an offer document," the finance ministry said.

After this amendment, only 15 CPSUs against 35 earlier will have to dilute their stakes and fund raising capability will come down to Rs. 20,000 crore in the next three years from Rs.1.25 lakh crore under the previous norm.

For the listed private sector companies the Finance Ministry said that they could increase their public stake to 25 percent in three years.