SEBI announces steps to expedite stake sales by promoters

In a move to fast-track the sale of promoters' equity in listed companies to meet minimum public shareholding norms, SEBI opened a new window for share sales and relaxed buyback rules.

The decision taken by the market regulator ahead of the Cabinet meeting Wednesday will pave the way for the top 100 companies, including blue-chip PSUs like ONGC, IOC, SAIL, BHEL and NTPC, to offload their equity expeditiously.

The government is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal.

The decisions taken at SEBI's board meeting here will provide an enabling framework for expeditious sale of PSU equities.

These include a new mechanism called an 'Institutional Placement Programme (IPP)' that would allow promoters to sell up to 10 per cent of their capital through an auction.

"The following additional methods, viz. Institutional Placement Programme (IPP) and Offer for Sale of Shares Through the Stock Exchange for the Purpose of Compliance with SCRR Requirements, are being introduced," SEBI said in a statement after the board meeting.

As per government norms, at least 10 per cent of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector companies, the minimum public shareholding should be 25 per cent.

The announcement comes within days of the government allowing foreign individuals to directly invest in the stock market with a view to boost the market sentiment.

SEBI said under the IPP mode, companies would be required to simultaneously file a red herring prospectus/prospectus with SEBI, the Registrar of Companies and stock exchanges.

Using this method, it said "public shareholding can be increased by 10 per cent or such lesser percentage as is required to comply with the minimum public shareholding requirement."

Under the new mechanism, the offer would be restricted to Qualified Institutional Buyers (QIBs), it said. A minimum of 25 per cent of the offer would be reserved for mutual funds and insurance companies.

The company or promoter would announce an indicative floor price or price band at least one day prior to the opening of the offer, it said.

Issuers shall endeavour to maximise the number of allottees in order to ensure wider distribution of shares, it said, adding that there shall be at least 10 allottees in every IPP issuance. Furthermore, no single investor shall receive allotment for more than 25 per cent of the offer size.

The regulator also allowed the stock exchange to offer a separate window for the purpose of such sales.

The duration of this window would co-exist with the normal trading hours, it said.

As per the board decision, it said, the offer shall be for at least 1 per cent of the paid-up capital of the company, subject to a minimum of Rs 25 crore.

"Only the promoter/promoter group of companies which are active/eligible for trading would be permitted to offer their shares for sale. Promoter/promoter group of the company would not be permitted to bid for the shares," it said.

Allotment would be done either on price priority or a clearing price basis proportionately and would be overseen by the exchanges, it added.

"Apart from use for compliance with minimum shareholding requirements, this method can be used by promoters of the top 100 companies (based on average market capitalisation) for sale of their stake," it said.

With regard to buyback, the regulator said, "The timeline for various activities involved in the buyback process have been revised, which shall result in a substantial reduction of the time taken for completion of buyback."

The company shall announce the ratio of buyback as is done in the case of rights issues and fix a record date for determination of entitlements as per the shareholding pattern on the record date, it said.

While shareholders are free to tender over-and-above their entitlement, it said, acceptance of shares shall first be based on the entitlement of each shareholder and if any shares are still left to be bought back, acceptance of additional shares tendered over-and-above the entitlement shall be in proportion to the excess shares tendered by the shareholder.

The public announcement shall be published within two working days from the date of a board or shareholders' resolution, as the case may be, it added.