RTTNews - India's Finance Minister Pranab Mukherjee has approved a plan, which proposes that at least 25% shares should be owned by public in all listed public sector companies and private companies, starting as early as April 2010, reported the Economic Times. This includes investment and financial institutions. The government and the market regulator believes that the investors could have a widened choice of stocks to pick from following the implementation of the new proposal.
Mukherjee said that the government-owned and private companies in which the founders own more than 75% stake are required to offload 5% per annum till the public owned shareholding becomes 25%.
The new rules will affect public sector companies like Steel Authority of India Ltd, Minerals and Metals Trading Corp., National Mineral Development Corp., and State Bank of Mysore that have government shareholding of above 75% stake. Also private companies in which the founders own more than 75% stake such as Puravankara Projects, Ackruti City, Wipro, Jet Airways, Nirma and Novartis will be impacted.
About 150 big firms in which promoters own more than 75%, including 25 state-owned enterprises could together raise nearly Rs.1.5-lakh crore at current market prices, including about Rs.1.2-lakh crore by the 25 government-run firms. The proposed plan was announced by the finance minister in the union budget.
The government proposed the plan to widen the investor base, improve liquidity and reduce scope for manipulation, the Corporate India opposed it as it compels promoters with large shareholdings to offload their stakes below 75%.
According to a top SEBI official, the market regulator backs the proposal and insisted that there should be no discrimination between the public and private sector companies when it comes to implementation. Currently, though 25% stake of a company should be held by public, companies operating in sectors such as IT, infrastructure, telecommunications and media as well as state-run firms are exempted.
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