Sebi allows promoters to use ETF route to meet minimum public shareholding norm

With a view to ease compliance of minimum public shareholding norms for promoters of listed entities, the Securities and Exchange Board of India (Sebi) has reviewed and rationalised some of the methods for the same.

Sebi has been receiving representations from listed entities and other stakeholders, requesting relaxation from compliance with the conditions specified in the existing methods and approval for using non-prescribed methods to achieve the minimum public shareholding norm.

Current norms require public shareholders to own a minimum of 25% stake in a listed entity.

The regulator has allowed promoters and promoter group entities to sell shares to exchange traded funds to meet the public shareholding norms. This provided promoters are selling a maximum 5% of the paid-up equity share capital of the listed entity.

In such a case, the promoter must inform stock exchanges one day prior to the proposed sale. Details of the promoter selling the stake, the quantum of shares, the intention behind the proposed sale, and the ETF to which the sale will take place should be mentioned, Sebi said.

Further, public shareholding can be increased through allotment of shares under an employee stock option scheme, provided the maximum sale is 2% of the paid-up equity share capital of the company, the regulator said.

Several companies, particularly government-owned entities, have not yet complied with the prescribed minimum public shareholding norms.

Last month, the Centre amended the securities contracts regulation act for strategic disinvestment in order to exempt listed companies from the minimum public shareholding norm, in which the government and public sector companies individually or together hold majority stake.

This was done to pave the way for the disinvestment of IDBI Bank.

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