RPT-UPDATE 2-India sets 25 pct minimum float for listed firms

Mon Jun 7, 2010 8:11am IST

Stocks

   

(Repeats story issued late on Friday)

* Firms not meeting rule have to lift public float 5 pct/yr

* $60 bln in equity may be sold in coming yrs-Prime Database

* Rule could further crowd pipeline for Indian share sales

* DLF, NTPC, Wipro are index firms that don't meet rule (Adds details, quotes)

By Pratish Narayanan and Prashant Mehra

MUMBAI, June 4 (Reuters) - India on Friday set out new rules requiring listed companies to have a public float of at least 25 percent, a move which could prompt tens of billions of dollars in share sales and further crowd the pipeline for new issues.

Listed companies with a free float of less than 25 percent must increase it by a minimum of 5 percent a year, the government said in a statement.

The new rule could force companies to raise as much as $60 billion by selling stakes over the next few years, according to an estimate by Prithvi Haldea, chairman and managing director of Prime Database.

By comparison, Indian companies raised about $20 billion in equity last year in a market that rose about 80 percent. The main index is down 2 percent so far this year.

Among companies in the 30-share benchmark BSE index, realty firm DLF (DLF.BO), power producer NTPC (NTPC.BO) and software services firm Wipro (WIPR.BO) have a public float of less than 25 percent, according to Bombay Stock Exchange data.

"This is not a good situation, because there is already a glut of issues lined up in the market," said V.K. Sharma, head of private broking and wealth management at HDFC Securities.

Earlier this year, investment bankers forecast that India could see equity issuance of roughly $30 billion in 2010, but poor markets have led some companies to defer their plans.

For a list of Indian companies expected to make an IPO this year, see [ID:nSGE6360AZ]

"We don't expect any dramatic fallout because the government has allowed time to increase the limit," Sharma said.

Friday's rule change should give a boost to investment banks in a competitive market where deals are often crowded with multiple underwriters and fees tend to be low.

"It's a good move for increasing market depth and liquidity. Companies could adopt various routes to meet these new norms. The fund raising activity should pick up in the next two years," said Anil Ladha, head of capital markets at ICICI Securities.

Several multinational firms that have listed their Indian units on local exchanges and retained more than a 75 percent stake may choose to delist, HDFC's Sharma said.

Honeywell Automation India (HONE.BO), Alfa Laval ALFA.BO and Novartis India (NOIN.BO) are among firms with a public float of less than 25 percent which are controlled by an overseas parent.

The Indian government is implementing a plan to sell down holdings in 60 state firms over the next few years, and the new rule may force share sales in additional state companies.

Regulators had been discussing raising the minimum float for the past few years.

Unlisted firms that go public with a post-issue market capitalisation of more than 40 billion rupees ($856.5 million) may go public with a 10 percent float, but will have to increase their public float by at least 5 percent a year. ($1=46.7 rupees) (Additional reporting by Sumeet Chatterjee; Editing by Tony Munroe and David Cowell)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 

REUTERS SHOWCASE

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage