India to Impose Minimum 25 Percent Public Holding Rule for Listed Companies

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Apr. 23 – India’s Ministry of Finance said that it will likely implement a minimum 25 percent public holding rule for all listed companies next month.

Currently, only future public issues are required to follow the 25 percent rule but now existing listed companies may be asked to comply as well. The minimum public holding rule will apply for both private and public sector companies. Official sources told The Economic Times that big public issues could be exempted from the requirement as the market may not have an appetite for such big issues.

Some public sector companies have public holdings below 25 percent. Rules on the 25 percent minimum public shareholding for the listed companies have existed since 2006 although many exemptions were considered. The government now wants a new proposal that will provide a boost in public holdings of listed companies following stricter rules. “It would be explicit…There would be no exception. This would include public sector companies as well,” a senior ministry official said.

“The process (to draft rules) has started…The framework would be ready by this year-end,” the official added. The government will need to revise the Securities Contracts Rules for the purpose.

“This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies,” Finance Minister Pranab Mukherjee said during his budget speech.