New Delhi, Mar 9: The government's proposal to hike public holdings in every listed company to 25 per cent from existing level of 10 per cent should be done in a phased manner, spread over a period of five years as against one go, an Industry body said.
''The amendments in the Securities Contracts (Regulation) Rules, 1957 should not be effected in hurried manner to hike the ceiling of public holdings in enlisted companies as it will create a cautious in capital market,'' Assocham President Venugopal N Dhoot said in a representation submitted to the Finance and Corporate Affairs Ministries.
Mr Dhoot pointed out that the government wants to increase the public holdings in enlisted companies to 25 per cent from 10 per cent now by introducing the amendment in 1957 Act within a period of three months which is too short to be complied with and create a resource generation problem for listed companies.
It should, therefore, be avoided as much as possible and a minimum period of five years be fixed to implement the move of the government in this direction.
''Considering the economic growth of the country and the market capitalisation of listed securities, the government should not uniformly initiate increase in public holdings in listed companies to the extent of 25 per cent in one go,'' he said.
The Chamber has cited a recent study of market capitalized top 30 companies which indicates that only 3 of 30 companies, have a public shareholding below 25 per cent if the holding of Financial Institutions (FIs), banks, Foreign Institutional Investors (FIIs) is taken in public shareholdings and only 8 of these 30 companies, have a public shareholding of 25 per cent, if the holding of Fis, banks, FIIs is not taken into public shareholding.
If for any reason, the public holding reduces below 25 per cent, the promoters, management and company may be jointly and severally be liable to bring the public holding to 25 per cent within three months in the manner prescribed by SEBI, failing which appropriate enforcement action including delisting may be taken which is not fair.
The Chamber has also argued that their should be same regulations applied for public holdings increase for listed companies in government and private sector.
Besides, the Assocham is also of the firm view that the power of stock exchanges to relax any of conditions for listing with the prior approval of Securities&Exchange Board of India (SEBI) in respect of a government company needs to be withdrawn. Likewise, the powers of SEBI to relax listing requirement of public companies should also be withdrawn.
The Chamber's representation highlights that the standards for initial listing are prescribed in Rule 19 (2) (b) of the Securities Contracts (Regulation) Rules, 1957 provide that at least 10 per cent of each class or kind of securities issued by a company was offered to public for subscription through advertisement in newspapers for a period not less than two days and that applications received in pursuance of such offer were allotted subject to a few conditions.
These include a minimum 20 lac securities (excluding reservations, firm allotment and promoter's contributions) offered to the public. Secondly, the size of offer to the public that is the offer price multiplied by the number of securities was minimum Rs 100 crore and the issue was laid only through book building method with allocation of 60 per cent of the issue size to the qualified institutional buyer as specified by the SEBI.