Initiating a wide range of measures, Securities and Exchange Board of India (SEBI) on Thursday asked all listed public sector undertakings (PSUs) to ensure at least 25 per cent public shareholding within three years and unveiled new norms for research analysts, employee stock option schemes as well as reforms to boost the primary market.
Besides, the capital market watchdog has decided to share know your client (KYC) information with entities regulated by other financial sector watchdogs, a move aimed at having common norms across the financial market.
Approving a slew of reform measures, the SEBI board said that all listed PSUs should achieve a minimum public shareholding of 25 per cent within three years.
The decision, aimed at ensuring uniformity among listed entities irrespective of their promoters, would also help the government raise close to Rs.60,000 crore from the sale of shares in around 36 listed PSUs where the public shareholding is less than 25 per cent.
Under current norms, government undertakings should have at least 10 per cent public shareholding whereas for non-PSU firms the minimum level is 25 per cent. “Today the SEBI board has taken some very very important decisions,” SEBI Chairman U. K. Sinha told reporters after the board meeting here.
Looking to revive the primary market, the market regulator has eased norms related to the size of an initial public offer (IPO) and pricing of preferential shares while allowing anchor investors to have a greater exposure to the offering.
All 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 per cent, or Rs.400 crore, whichever is lower. Meanwhile, to safeguard investors from manipulative reports and usher in more transparency, the SEBI board has approved detailed norms for ‘research analysts’ that include stringent disclosure requirements.
“In India, research analysts were not being regulated. Now we have provided that all the people who are doing research reports they will be regulated, there will be a requirement, registration with SEBI and post-registration they will have certain disclosure requirements,” Mr. Sinha said. Meanwhile, 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.
Further, the proposal allowing non-promoter shareholders having over 10 per cent stake to use the OFS mechanism has been cleared by the SEBI board. Over 100 companies have tapped the OFS route raising about Rs.50,000 crore since its introduction in February 2012.
In addition, SEBI has decided to make OFS route available to the top 200 listed firms by market capitalisation, compared with the top 100 listed companies at present.
The SEBI board also approved an easier set of regulations for employee stock option schemes that among other things would classify ESOP Trusts as a separate category of shareholding entities.
With new regulations for ESOPs, the regulator has allowed companies to have employee stock option programmes where they can buy their own company shares subject to certain conditions.
“We have now created another category that whatever shares are held in the ESOP Trust they will be neither counted as a promoter group nor counted as a public it will be counted as a separate group and for meeting the requirements of our regulations we have given them five years time,” Mr. Sinha said.
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.
Further, a transition period of five years has been given to comply with various requirements including re-classification of “shareholding of existing employee benefit schemes separately from ‘promoter’ and ‘public’ category”. Regarding sharing of KYC details with other entities, Mr. Sinha said it was a “move towards aligning one single KYC across the financial market. So this is a first move in that direction which will be very very investor-friendly”.