(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
* 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 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
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
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
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
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.
(Additional reporting by Sumeet Chatterjee; Editing by Tony
Munroe and David Cowell)