India Inc must meet listing target in 5 yrs starting April

NEW DELHI: Come April, entrepreneurs such as Azim Premji and Anil Ambani may have to begin the groundwork to reduce stakes in their companies as the finance ministry starts to accelerate the long-standing proposal for higher public holding in listed companies that may lead to better stock price discovery.

Finance minister Pranab Mukherjee���s officers have drawn up a proposal that would make it mandatory for companies to have at least 25% public float over five years beginning 2010. Companies will have to sell at least 5% a year to achieve the minimum public holding, a finmin official told ET.

Mr Mukherjee, in this year���s budget, had said the minimum public holding will have to be 25% if a company wants to be listed on the stock exchanges , a plan the Securities & Exchange Board of India had proposed at least twice in the past but was not implemented .

Many companies were selling 10% or so to investors in initial public offerings with the rest in promoters��� hands, leading to limited supply of shares for trading.

That, some believe, led to abnormal share price movements. The public holding norm was reduced to 10% from 25% in the late 1990s to benefit technology companies that was subsequently extended to infrastructure too.

���The gradual dilution of promoter holding by 5% a year will not have any significant negative impact on the share price, considering the robust investor appetite in the market,��� said Naresh Kothari, president , Edelweiss Capital.