New Delhi: Terming SEBI's actions as "harsh" against firms which could not meet public shareholding norms, industry body Assocham has said the non-compliant companies should be given three more months to comply with the regulatory requirements.
While making a strong plea to SEBI to take less stringent action against promoters of 105 companies which could not bring their holding to below 75 percent, the industry body asked for "at least another three months to meet the guidelines on public holding."
As per SEBI's minimum public shareholding norms, all private sector listed companies need to have at least 25 percent public shareholding, and promoters were asked to lower their stake to 75 percent or below by June 3, 2013.
For public sector firms, minimum public shareholding has been fixed at 10 percent and the deadline is August 9, 2013. These norms were announced in June 2010 to ensure that the public investors get a larger presence and help create an equity culture in the country.
"While it is true that it has been three years since SEBI had asked listed firms to take firm steps to increase public holding, it must also be realised that selling stocks in the marketplace is a function of sentiments or else the promoters would be compelled to offload equity at a distress price.
"This is particularly true about the small and mid-cap companies," Assocham Secretary General D S Rawat said in a statement.
In a tough action, SEBI has restrained the promoter groups from raising funds from the market, barred them from selling and buying their company shares and receiving dividends in excess of 75 percent ceiling.
An overwhelming number of companies have been able to raise the public holding to 25 percent, particularly in the last few months as SEBI deadline of June 3 was coming closer.
But given the volatility in the market and thrashing of the values of the mid-cap shares, it was really a difficult call to sell equity at a distress price.
Besides, there could have been procedural issues faced by some companies because of which the public offering could not have materialised. "Not all of them would have intentionally missed the deadline of the regulator," Rawat said.
He said in the process of punishing the promoters, a huge amount of collateral damage has been done to the minority shareholders as the market sentiments around these companies have been hit hard eroding the wealth of the common shareholders, who had no say in the issue at all.
The Assocham Secretary General wondered whether SEBI would be able to take similar harsh measures against the government in case the PSUs with more than 90 percent government holding do not divest in favour of the common investors.
First Published: Sunday, June 09, 2013, 13:00