Monday, November 29, 1999

Selloff dept seeks more time for 25% public holding guidelines

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The disinvestment department moved the government this week asking for adequate time to fulfill stipulations prescribed under the new rules that makes minimum 25% public holding in listed companies, a government officials told FE. According to the department, a strict implementation of holding norms in the current form will trigger a deluge of scrips from government-owned companies and strategic sale in listed companies, which are loss-making or have a negative net worth. Current disinvestment policy does not allow strategic sales or QIPs in public sector companies."We are not looking at delisting of the loss-making companies and unless a strategic sale method is adopted. it will be difficult to meet the stipulated 25% holding in them," said a disinvestment department official. The official also pointed out that unless qualified institutional placement route is adopted, the listed public sector companies will not be able to bring down the stake as per the rule. According to the new norms, companies with less than 25% public holding has to increase it by at least 5% every year.Latest data show 179 listed companies in the country have public holding of less than 25%. Based on the current market price and the extent of promoter holding, it is estimated that these companies will raise Rs 1.6 trillion if they opt for sale of shares and Rs 2.1 trillion if they plan to dilute their stake via issue of fresh shares. A study by Crisil shows that more than 82% of the estimated funds are likely to be raised by 29 listed government entities in order to adhere to the proposal.Heads of public sector companies with public float of less than 25% maintained that clarity is yet to emerge on the issue.On the issue NTPC chairman RS Sharma said, "The issue is under government's consideration and we will take steps when the government asks us." Finance secretary Ashok Chawla had earlier told media that the government is open to changing the mandatory holding norms if necessary.

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