PSUs exempted from 25 pct float norm

NEW DELHI Mon Aug 9, 2010 7:44pm IST

People walk past the Bombay Stock Exchange (BSE) building in Mumbai January 9, 2009. The government has exempted state-owned firms from new rules requiring companies to have a public float of at least 25 percent, following two major share sales from government-owned firms earlier in the year that drew tepid responses. REUTERS/Punit Paranjpe/Files

People walk past the Bombay Stock Exchange (BSE) building in Mumbai January 9, 2009. The government has exempted state-owned firms from new rules requiring companies to have a public float of at least 25 percent, following two major share sales from government-owned firms earlier in the year that drew tepid responses.

Credit: Reuters/Punit Paranjpe/Files

Related Topics

A statue of Ganesh, the deity of prosperity, is carried in a taxi to a place of worship on the first day of the ten-day-long Ganesh Chaturthi festival in Mumbai August 29, 2014. REUTERS/Danish Siddiqui

Ganesh Chaturthi Festival

During Ganesh Chaturthi idols will be taken through the streets in a procession accompanied by dancing and singing, and will be immersed in a river or the sea in accordance with Hindu faith.  Slideshow 

NEW DELHI (Reuters) – The government has exempted state-owned firms from new rules requiring companies to have a public float of at least 25 percent, following two major share sales from government-owned firms earlier in the year that drew tepid responses.

The regulations, set out by the government in June, requires listed companies with a free float of less than 25 percent to increase it by a minimum of 5 percent a year.

They were expected to force 10s of billions of dollars in share sales and prompt new issues.

However, the government said on Monday state-run listed firms would be exempt from floating a minimum of 25 percent on stock exchanges without saying the reason for its decision.

Analysts had said the rules put pressure on the government in its programme to cut its holdings in 60 state firms over the next few years. It plans to raise $8.6 billion through stake sales in the fiscal year to March 2011.

Already shares sales from state-run NTPC, India's No.1 power producer, in February, and NMDC, the country's top iron-ore miner, in March failed to receive significant interest from foreign investors. They were covered only after state-run financial groups pitched in with big orders.

The government still owns 84.5 percent of NTPC, and 90 percent of NMDC, stock exchange data showed.

In 2009, the government said unlisted state firms making a profit in the past three consecutive years should list and all profitable, listed state firms must have at least 10 percent of their shares in public hands.

State-run Coal India, the world's largest coal miner, will file a draft prospectus this week for an initial public offering to raise as much as $3 billion, three sources with direct knowledge of the matter told Reuters on Friday.

Other government share sales in the pipeline this fiscal year include public offerings in Steel Authority of India Ltd, Hindustan Copper and Power Grid.

The regulation on public floats could force companies in India to raise a total of as much as $60 billion in stake sales over the next few years, according to an estimate by Prithvi Haldea, chairman and managing director of Prime Database, said in June when the new rules were set out.

Indian companies raised about $20 billion in equity last year in a market that rose about 80 percent. The benchmark index is up 4.7 percent this year.

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

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.

(Editing by Surojit Gupta and Karen Foster)

(For more news on Reuters India click in.reuters.com)

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

  • Most Popular
  • Most Shared

Market Eye

REUTERS SHOWCASE

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Modi in Japan

Modi in Japan

Japan aims to double India investment in 5 years - Nikkei  Full Article 

Market Outlook

Market Outlook

Indian shares headed for correction, but outlook strong - BofA Merrill.  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Reuters India Mobile

Reuters India Mobile

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