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SEBI unveils new set of reforms measures; PSUs to have 25 percent public holding

20 Jun 2014 Evaluate

Capital markets regulator, Securities and Exchange Board of India (SEBI) has approved a slew of reforms which include increasing public holding in all PSUs to a minimum 25 per cent and unveiled new norms for research analysts, employee stock option schemes as well as reforms to boost the primary market.

The capital market watchdog has made it mandatory for all listed PSUs to have at least 25 per cent public shareholding within three years. The move is aimed at ensuring uniformity among listed entities irrespective of their promoters and is expected to help the government raise close to Rs 60,000 crore through sale of excess shares in 38 state-run firms. As per the existing norms, the PSUs should have at least 10 per cent public shareholding whereas for non-PSU firms the minimum level is 25 per cent. To revive the primary market, the SEBI eased norms related to the size of an initial public offer (IPO) and pricing of preferential shares. Furthermore, it has also allowed the anchor investors to have a greater exposure to the offering. The SEBI further notified that the companies with a post-issue capital above Rs 4,000 crore are compulsorily required to offer at least 10 per cent stake in the IPO. In other IPOs, minimum dilution to public will be 25 percent, or Rs 400 crore, whichever is lower.

In order to safeguard investors from manipulative research reports, the capital market regulators has approved detailed norms for 'research analysts'. The people who are doing research reports will have to register with SEBI and post-registration research analyst should have to comply with certain disclosure requirements. Regarding the retail investors, it noted that retail investors would now get a 10 per cent reservation in an offer for sale (OFS) and could also look forward to discounts by entities selling shares through this route. Furthermore, the capital regulator has also decided to make OFS route available to the top 200 listed firms by market capitalisation, compared with the top 100 listed companies at present. To implement common norms across the financial market, the SEBI has decided to share know your client (KYC) information with entities regulated by other financial sector watchdogs.

The SEBI has also approved an easier set of regulations for employee stock option schemes which would classify ESOP Trusts as a separate category of shareholding entities. According to these norms, the regulator has allowed companies to have employee stock option programmes where they can buy their own company shares subject to certain conditions. The notification further added that to ensure smooth transition with the new framework, the existing employee benefit schemes have been provided with a time period of one year from the notification date.

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