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Indian Regulator Recommends State-Run Firms Raise Public Shareholding; SEBI Says the Government Should Cap its Stake in Listed Companies at 75%

Indian Regulator Recommends State-Run Firms Raise Public Shareholding

SEBI Says the Government Should Cap its Stake in Listed Companies at 75%

MUKESH JAGOTA And KENAN MACHADO

June 19, 2014 9:56 a.m. ET

NEW DELHI—India’s stock market regulator recommended Thursday that state-controlled companies be required to sell at least 25% stakes to the public.

The Securities and Exchange Board of India said it wants to close the loophole that allows state-run firms to remain listed even if only 10% of their shares are held by the public.

The regulator recommended the government take three years to sell down its stakes in listed companies to less than 75%.

The market may soon be flooded with the stocks as there are 36 state-run companies in which the government holds a stake of more than 75%.

“We would also see good offerings from (state-run) companies to bring their holdings in line with the public holding norms,” said Girish Nadkarni, head of investment banking at Motilal Oswal Investment Advisors Ltd.

India’s largest mining company Coal India Ltd. 533278.BY -1.94% , metals traderMMTC Ltd. 513377.BY +2.21% , India’s largest steelmaker Steel Authority of IndiaLtd. 500113.BY -2.45% , lignite mining company and power producer Neyveli Lignite Corp. 513683.BY +0.31% Ltd. and tractor and watchmaker HMT Ltd.500191.BY +3.40% are a few of the big firms that would have to sell shares to comply.

The new requirement would help the government raise money and give investors a bigger voice in how the companies are managed.

As part of a legacy of its socialist past, most of India’s biggest mining companies, oil and gas firms and power producers are government-owned.

Almost every year India falls short of its privatization target as ministries and public sector unit managers don’t want to give up control of the companies. Acceptance of a new minimum public shareholding rule could at last force the firms to privatize further.

 

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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