Govt proposes min. 25 pct public stake in listed firms

MUMBAI (Reuters) - The government on Friday proposed that 25 percent of a listed company's equity should rest with the public, in a change to stock market listing rules it said should apply both to government and private firms.

A proposal from the finance ministry said powers of the stock exchanges to relax listing conditions needed to be withdrawn and powers of the market regulator to do so may also be taken away.

"A large number of shares distributed among a large number of shareholders is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices," the statement said.

"The larger the public float, the less is the scope for price manipulation," it said.

A discussion paper had been placed on the finance ministry's Web site www.fin.nic.in.

The word "public" also needed to be defined, the statement said, noting that if investors such as foreign and local institutions, mutual funds and private corporate bodies came under that definition, then the floating stock would be "insignificant".

"The public offer envisaged at initial listing is of no consequence unless the public are actually allotted shares," it said.

In addition, it proposed that if a company's public holding fell below 25 percent, it should be raised back to that level within three months and if not, it could be delisted.

Many companies on India's stock exchanges have public holdings below 25 percent.